Sydney house prices have declined for the first time in 17 months, the latest CoreLogic data reveals.

Home prices across Australia’s major cities inched higher in September, with Sydney’s rare dip weighing on the national index and offering more evidence that tighter lending rules were working to head off a debt-driven bubble in the sector.

Prices in Sydney eased 0.1 per cent in September, dragging the annual pace back to 10.5 per cent from 13 per cent in August.

Melbourne fared much better, however, with prices rising 0.9 per cent for September and 12.1 per cent on the year.

“This slowing in the combined capitals growth trend is heavily influenced by conditions across the Sydney market where capital gains have stalled,” said CoreLogic head of research Tim Lawless.

Property consultant CoreLogic said its index of home prices for the combined capital cities rose just 0.3 per cent in September, from August when they edged up 0.1 per cent.

A slowdown is much desired by Australia’s main bank watchdog APRA which has tightened standards on investment and interest-only loans, leading banks to raise rates on some mortgage products.

The Reserve Bank of Australia has also been concerned that debt-fuelled speculation in property could ultimately hurt both consumers and banks.

“The stronger housing market conditions in Melbourne are supported by auction clearance rates which have consistently remained above 70 percent,” said Lawless.

“Additionally, advertised stock levels remain remarkably low and private treaty sales continue to sell rapidly, averaging 30 days on market.”

Conditions varied widely across other cities, with Hobart rising 14 per cent on the year while prices in Perth fell 2.9 per cent.

Outside the cities, prices edged up 0.1 per cent in September to be 5.6 per cent higher for the year.

The RBA holds its October policy meeting on Tuesday and is considered certain to keep rates steady again, in part because any further easing might only encourage more borrowing by already heavily indebted households.

The inexorable price rise in the major cities has taken homes out of the reach of many first-time buyers and become a political hot potato.

The conservative government of Malcolm Turnbull has blamed a lack of supply for the problem, while the opposition Labor Party has pointed the finger at favourable tax treatment for property investment.

This article was first published in The Sydney Morning Herald www.smh.com.au last October 2, 2017. Here’s the full text.