* Home prices grow 3.6 pct, slowest since early 2013
* Business survey shows softer conditions in November
* All adds to risk of further rate cuts next year
By Wayne Cole
SYDNEY, Dec 13 (Reuters) - Australian home prices grew at the slowest pace in over three years last quarter amid tougher rules on investment lending and economic hardship in mining states, a cooling that could reduce hurdles to a further cut in interest rates.
An easing might be needed if business conditions continue to soften at the pace suggested by National Australia Bank's NAB.AX latest survey of 500 firms.
Its index of business activity slipped 2 points to +5 in November, the lowest since April 2015, as tough times in the retail industry weighed on sales and profits.
"We are becoming increasingly concerned about the underlying momentum in the economy as evidence mounts that the non-mining economy is losing steam," said NAB chief economist, Alan Oster, who has had a bearish outlook for some time.
Government figures last week showed the economy shrank 0.5 percent in the third quarter, the first contraction since early 2011, with business investment again very weak.
Tuesday's data from the Australian Bureau of Statistics showed home prices rose a surprisingly modest 1.5 percent in the third quarter, less than the 2.3 percent that economists had expected.
Annual growth braked to 3.5 percent, far below last year's frothy top of 10.7 percent.
On the face of it, that should reassure the Reserve Bank of Australia (RBA) which has been worried that ever easier policy was fuelling a debt-driven bubble in the market.
The central bank has been on hold since cutting rates to a record low of 1.5 percent in August.
Indeed, the slowdown in prices was partly engineered by regulators who, alarmed at frenzied demand in Sydney and Melbourne, imposed tighter rules on investment lending.
The impact was clear in Sydney, where annual price growth sank to a four-year low of 3.2 percent, a huge pullback from last year's high of almost 20 percent.
Weakness was also evident in states exposed to the long-suffering mining industry, with Perth recording a drop of 4.0 percent in the year to September.
The weakness in the ABS data stands in contrast with some other measures of prices which report continued strength.
Property consultant CoreLogic's index showed annual price growth accelerated to 9.3 percent in November, from 7.5 percent in October. The ABS series is, oddly enough, based on CoreLogic's database.
Policymakers will not want home values to weaken too far given they make up the greater part of household wealth and provide a much needed offset to subdued growth in wages.
In the past five years the value of all the nation's homes has climbed by almost 40 percent to reach A$6.15 trillion ($4.6 trillion).