Australian house prices fell in May for the first time in 18 months, as a 'perfect storm' of conditions dampened demand.

Home values in Australia's state and territory capitals fell 1.1 per cent last month from April, according to CoreLogic data released Thursday. Still, prices across the combined capitals were 8.3 per cent higher than a year ago.

The monthly decline comes after regulators tightened lending curbs amid fears of a housing bubble, and the nation's banks raised interest rates -- especially for interest-only loans which are popular with property investors seeking to take advantage of tax breaks.