The rest of the state and territory capitals registered falls in dwelling values, with Hobart down 2.4 per cent and Canberra off 2.3 per cent. In Perth, dwelling prices were virtually unchanged month-on-month, down 0.1 per cent. "If they're wanting to buy in Australia, they're wanting to buy in Sydney, because everyone knows Sydney, or (in) Melbourne, because it's the second-biggest city.": RP Data senior research analyst Cameron Kusher Credit:Wayne Taylor In absolute terms, Sydney as usual posted the highest median dwelling price for the month, of $680,000, followed by Melbourne at $555,000. Darwin was third with a median price of $550,000. The cheapest capital city is Hobart, where an average dwelling costs just $315,000. The latest data confirms a moderating price rise trend across Australia, including in cities where strong investor demand continues to drive up the costs of mainly inner-city units and other type of dwellings.

Experts have attributed consistent price inflation in the inner suburbs of Sydney and Melbourne to strong investor demand from overseas buyers and self-managed superannuation funds, combined with the call for student rental accommodation. However, year-on-year price growth across the country has slowed from a peak of 11.5 per cent in April this year to 8.9 per cent in October. For the first 10 months of this year, the growth rate was 7.3 per cent, compared with 10 per cent in 2013. The national market is increasingly fragmented: year-on-year capital growth in Sydney is 13.1 per cent, while Melbourne's is 8.9 per cent and Brisbane's is 5.6 per cent.

Canberra dwelling prices have barely grown 1 per cent in the last 12 months. RP Data's senior research analyst Cameron Kusher told BusinessDay the latest survey confirmed an emerging trend of divergence between different capital cities' performances, and moderating growth in the high-demand urban centres. "If you talk at a national level, obviously that's driven largely by Sydney and Melbourne, but it's not a national recovery," he said. "It's not really strong growth nationally - it's really a Sydney and Melbourne story."

He said, although low mortgage rates and the hunt for returns in a low-yield economy was driving investment in property development and non-owner-occupier purchases, the trend was patchy. Overseas investors were more likely to target Sydney and Melbourne than anywhere else in the country, Mr Kusher said. "If they're wanting to buy in Australia, they're wanting to buy in Sydney, because everyone knows Sydney, or Melbourne, because it's the second-biggest city," he said. He said another factor was that fewer people were leaving Sydney and Melbourne for mining work or cheaper housing than before the global financial crisis. "Interstate migration into Queensland and into Western Australia has really slowed," Mr Kusher said.

He said price moderation was likely to continue, but only a rise in interest rates or controls on bank lending to property investors would trigger any brusque slowdown in growth. "In the next 12 months we'll continue to see the rate of growth slow, but I think you'll continue to see growth ocurring," he said. He said Sydney and Melbourne would continue to lead the way, although he forecast a "bit of a pick-up in Brisbane". Loading However, Mr Kusher did warn that, with falling real incomes and climbing dwelling prices, affordability would eventually become an issue in Sydney and Melbourne.

"At some point, people just aren't going to be able to pay the prices of those homes that are available for sale," he said.