SYDNEY, May 1 (Reuters) - Home price rises slowed sharply in Australia's major cities in April, in a welcome respite for policymakers who have been alarmed at the risks of a debt-fuelled bubble in the housing market.
Property consultant CoreLogic said its index of home prices for the combined capital cities rose 0.1 percent in April, the weakest month-on-month rise since December 2015, compared with 1.4 percent in March.
Annual growth in overall prices slowed to 11.2 percent, from 12.9 percent.
The results come after dramatic gains in two of the country's hottest markets - Sydney and Melbourne - over the second half of 2016 and early 2017.
If the softening trend can be sustained, it would vindicate steps taken by regulators in recent months to cool the heat in the property market amid concerns that speculation in property could ultimately hurt consumers, banks and the economy.
Earlier this year, the main bank watchdog tightened standards on investment and interest-only loans to try and cool the market. Banks themselves have been raising mortgage rates.
After cutting interest rates to a record low of 1.5 percent last August, the Reserve Bank of Australia (RBA) has warned further easing would only encourage more borrowing by already heavily indebted households.
"The higher cost of debt, as well as stricter lending and servicing criteria, has likely dented investment demand over recent months," said CoreLogic head of research Tim Lawless.
However, "We need to be cautious in calling a peak in the market after only one month of soft results."
The CoreLogic data showed home prices in Sydney were flat in April but the annual pace of growth was still a blistering 16.0 percent.
Melbourne grew 0.5 percent in the month with annual growth at 15.3 percent.
Canberra, another hot market, suffered a fall of 2.8 percent.
Hobart was the strongest housing market, growing at 1 percent, with an annual gain at 13.6 percent.
Lawless noted the rush into investment properties and an expanding supply of apartments has driven yields to record lows in Sydney and Melbourne.
The slowdown in yields has in turn been a major drag on consumer price inflation, which hit record lows late last year.
Since January 2009, home values in Sydney have more than doubled while Melbourne has increased by 93 percent.
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 and is likely to announce some measures in its budget next week. (Reporting by Swati Pandey; Editing by Kim Coghill)