Australia’s property prices continue to rise – despite serious efforts by the regulator and banks to limit investor lending.

According to Core Logic RP Data, combined capital city house prices rose another 0.5% in the month of June, with strong growth coming out of Sydney (1.2%), Melbourne (0.8%) and Hobart (1.8%).

On a year-on-year (YoY) basis, both Sydney and Melbourne have seen dwelling values rise by more than 11%. Brisbane and Hobart also showed strong YoY growth with returns of 10% and 11.9% respectively.

House price indices

Source: Core Logic RP Data

Core Logic says the results show a rebound in housing market conditions after weak results from the December quarter of 2015.

But, despite the strong growth in some cities, it is notable that five capital cities recorded a decline in dwelling values in June 2016. Darwin, Adelaide and Canberra all saw monthly falls of more than 1%.

The trend shows that the two-tier housing market continues, with strong growth out of Sydney and Melbourne and weaker results in most other states. That’s despite moves by lenders to restrict lending to investors – as well as stop lending to foreign buyers.

What will the central bank do?

If the Reserve Bank of Australia (RBA) is looking at the data, it certainly won’t stop the central bank cutting rates next week if it wants to. Stronger growth across all cities would have likely given the RBA pause. A lower cash rate usually flows through into lower home loan rates – which can encourage higher lending growth.

The central bank cut the cash rate to 1.75% in May, and economists are expecting the central bank to cut rates further, in response to global economic uncertainty and low inflation here in Australia.

Lower rates could also spur the share market higher as investors chase higher returns. Australia’s big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC); and Telstra Corporation Ltd (ASX: TLS) are already offering mouth-watering dividend yields of more than 5%.

Warning signs

Core Logic RP Data Asia Pacific research director Tim Lawless did note that growth in June was lower than April and May – and that Sydney’s property market may be turning. He says homes are taking longer to sell, and vendors are offering larger discounts on their asking prices.

That may indicate that Sydney house prices could be in for a weak period and could even fall this year.

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Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.