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SYDNEY, June 1 (Reuters) - Houses prices in Australia's capital cities slipped for the first time in 1-1/2 years in May as demand appeared to cool off in Sydney and Melbourne, a sign that tighter lending restrictions were beginning to bite.
Property consultant CoreLogic said its index of home prices for the combined capital cities fell 1.1 percent in May, the weskest monthly result since November 2015, and compared with a gain of 0.1 percent in April.
Annual growth in overall prices slowed to 8.3 percent from 11.2 percent in April. Home values in Sydney eased 1.3 percent - the first fall since December 2015 while prices in Melbourne inched 1.7 percent lower.
The results come after dramatic gains in both the cities over the second half of 2016 and early 2017.
A slowdown will be welcome news for the Reserve Bank of Australia which is worried about a debt binge by households and the impact on overall consumer spending in the economy.
A sustained softening in price growth would vindicate steps adopted by regulators in recent months to take some of the heat off the housing market amid concerns that speculation in property could ultimately hurt consumers, banks and the economy.
Data out from the Australian Prudential Regulatory Authority (APRA) this week showed lending to home buyers slipped in the March quarter to its lowest level in a year, with growth in both owner-occupier and investor segments slowing.
The move follows the banking watchdog's decision this year to tighten standards on investment and interest-only loans to try and cool the market. Banks themselves have been raising mortgage rates. Interest-only loans fell nearly 15 percent in the March quarter, APRA data shows.
"We havent called the peak of the market yet. We want to see more data, we don't want to jump in too early," said Cameron Kusher, head of research Australia at CoreLogic. (Reporting by Swati Pandey; Editing by Shri Navaratnam)