Residential property prices rose by 1.9% across Australia’s eight capital cities in the December 2014 quarter, with only one city seeing a fall in values.

All apart from Darwin (with a drop of -0.6%) saw an increase in average property prices. Sydney lead the charge (up 3.4%), followed by Brisbane with 1.4% and Melbourne with 1.3%.

Only modest gains were seen in Hobart (1%), Adelaide (0.8%), Perth (0.3%) and Canberra (0.2%).

While concern of a possible ‘housing bubble’ remained on the radar, the recent residential property price index showed some indications to the contrary.

Housing Industry Association economist Geordan Murray said the continuing rise in property prices were beginning to level out.

“The pace of home price growth peaked in early 2014, since then the rate has been slowing,’’ he said.

 “In most markets the price growth remains comfortably positive and at sustainable rates.’’

However, markets like Sydney, which rose 12.2% through the year to the December quarter 2014, continued to cause concern.

The latest research revealed that the Sydney market was out of reach for first time buyers.

It was now considered to take just under 60% of the median Sydney family’s weekly income to meet mortgage repayments of a home. 

“Sydney is the obvious exception, where despite some easing in growth throughout the year, the rate of home price growth remains high and this is something that policy makers are watching closely,‘ said Murray.

The Reserve Bank of Australia cut the benchmark cash rate to a record low 2.25 % from 2.50 % last week in response to soft inflation pressures and stalling growth in the economy.

“The RBA noted some concern about Sydney home prices, but also that Australia’s regulatory framework has the capacity to manage risks that may arise from the housing market, ‘’ said Murray.

Murray said a sharp reversal in in recent price growth would only come from some sort of economic shock.

“A deterioration in the wider economy would need to cause a widespread and prolonged deterioration in labour market conditions, and a sharp increase in the unemployment rate stemming from job losses,” he said.

Murray added that housing prices should continue to grow at a far more modest pace while interest rates remain low.

‘’This looks like it will remain the situation for some time yet.’’

For more information on the Residential Property Price Index, click here for the full report.