Median national home prices fell by 0.8 per cent in June, in original terms, from a 0.6 per cent increase in May, according to RP Data-Rismark figures. It was the largest monthly fall in home prices since April 2008.

''As mortgage rates have normalised, participants in the housing market have cut their house price growth expectations, which explains the current change in conditions,'' Rismark International managing director Christopher Joye said in a statement.

In the three months to June, Australian home values posted barely no growth, rising 0.1 per cent seasonally adjusted, RP Data-Rismark said.

For the same period, home prices in Sydney rose 0.5 per cent and by 0.2 per cent in Melbourne. Prices in Brisbane fell 1.3 per cent, and by 2.5 per cent in Perth.

Canberra home prices fell 0.8 per cent, while in Darwin they were unchanged at minus-0.1 per cent.

Home prices outside of capital cities rose by 0.3 per cent in June, after falling 0.9 per cent in May.

''It's sobering to remember here that we have had 17 consecutive monthly increases in Australian capital city home values,'' said Mr Joye.

''If the sharemarket rose for 17 months straight and then tapered, people would not think twice. It might be wise to apply the same logic to our housing market,'' he said.

In addition to interest rats rises, which have increased six times from October to 4.5 per cent, and slowing auctions, which are well below their February peak levels, Australia faces a poor level of housing affordability which has acted as a barrier for would-be buyers in the market.

The Reserve Bank will meet next week to decide again on the interest rate, although investors and economists expect no change.

The outlook for home prices gains has lowered, as well, with real estate agents, developers and other residential industry expects tipping only 1.4 per cent of price growth over the next year, down from 5.4 per cent growth expected three months earlier, according to the National Australia Bank quarterly property survey, released yesterday.

In the survey, buyers blamed rising interest rates, while developers pointed to tightening credit as the stumbling block for further price increases.

czappone@fairfax. com.au

BusinessDay