SYDNEY, July 3 (Reuters) - Home prices in Australia's major cities rebounded in June after a pullback the month before, but there were early signs the market was cooling as regulators tightened the screws on leveraged property investors.
Property consultant CoreLogic said its index of home prices for the combined capital cities rose 0.8 percent in June, following a rare 1.1 percent drop in May.
Annual growth in prices also accelerated to 9.6 percent, from 8.3 percent the month before, though that was still down from a peak of 12.9 percent in March.
The increase for the whole June quarter was also a modest 0.8 percent, the smallest since late 2015, with Sydney recording a notable slowdown.
Any moderation will be welcomed by the Reserve Bank of Australia (RBA) which is concerned that debt-fuelled speculation in property could ultimately hurt both consumers and banks.
The country's main bank watchdog has already tightened standards on investment and interest-only loans and banks have followed by raising rates on some mortgage products.
After cutting interest rates to a record low of 1.5 percent last August, the RBA has since warned further easing would only encourage more borrowing by already heavily indebted households.
"We are likely to see further tightening and repricing around investment lending and interest only lending over the coming months," said CoreLogic head of research Tim Lawless.
"Considering investors comprised just over 55 percent of new mortgage demand across New South Wales, a further slowdown in investment activity is likely to have a more substantial impact on housing demand in Sydney."
Annual price growth in Sydney ran at 12.2 percent in June, down from a top of 18.9 percent in March. Melbourne fared better, with prices up 1.5 percent in the June quarter and 13.7 percent for the year.
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. (Reporting by Wayne Cole; Editing by Richard Pullin)