The month of May saw the first drop in Australian home values since November last year according to data released this week. 

Home values fell by 0.9% over May according to CoreLogic RP Data’s May Index, but the fall is expected to be an isolated occurrence. 

CoreLogic RP Data head of research Tim Lawless believes the signs are pointing towards better growth through June. 

"The negative May result is likely due to a natural correction from the previously strong month-on-month results,” Lawless said

“Added to this is the market stimulus due to lower interest rates and a well-received federal budget in May – all of which are likely to keep momentum going in the market." 

Over the first four months of 2015, values have risen by 3.8% across the country, while the 12-month period since May 2014 saw a 9% rise. 

May also marked the third anniversary since the current value growth cycle commenced, over which time Lawless said capital city dwelling values have increased by 24.2%

Sydney has been the best performing capital city over that time, with a 39.3% increase in the three-year period, with Melbourne the next best performer with a 22.4% increase. 

In Darwin values are 18.3% higher, while Perth values are up 13.2% followed by Brisbane at 10.6%, Adelaide at 9.9%, Canberra at 8.3% and Hobart at 7.7%.

Though all capital cities have seen capital growth in the three years from May 2012, Lawless said the last 12 months has seen diverse growth levels across the country. 

“Dwelling values are down by 2% in Darwin and 1% lower in Hobart, while Perth is narrowly avoiding an annual correction with dwelling values up by just 0.7% over the past year."

Over the same 12-month period, prices in Sydney and Melbourne are up 15% and 9% respectively. 

While dwelling values rose in capital cities over the 36 months from May 2012, rental yields did not see a similar increase. 

“Dwelling values are 24.2% higher across the combined capitals over the past three years while weekly rents have risen by only 7.2%,” Lawless said

“The net result is that gross rental yields have been compressed from 4.3% back in 2012 to the current average gross yield of 3.7% across the combined capital city index.”

Rental yields are currently the lowest in Melbourne, with a typical house returning a gross yield of 3.2% while units are providing a higher gross yield, averaging 4.3%. 

Sydney follows closely behind, recording a gross yield of 3.4% for houses and 4.5% for units.

While unit rental yield may be outstripping houses, they have not seen the same level of capital growth houses have. 

House values in Sydney have risen 16.4% in the past year, while unit values have only risen 8.8%. 

It’s a similar story in Melbourne, where house values are up 9.8% in the past 12 months compared to only 2.9% for units.