_800x533_L_1411549591.jpg)
SYDNEY, Aug 3 (Reuters) - Home prices across Australia's capital cities surged in July as demand in Sydney and Melbourne stayed red hot even as regulators tightened the screws on investment lending by banks.
The blistering pace will pile pressure on policy makers to rein in borrowing for buy-to-let and make it trickier for the Reserve Bank of Australia (RBA) to cut interest rates any further into record territory.
Indeed, the heat in housing is a major reason the central bank is widely expected to hold rates at 2 percent at its monthly policy meeting on Tuesday.
Monday's figures from property consultant CoreLogic RP Data showed dwelling prices across all of Australia's major cities surged 2.8 percent in July, on top of a 2.1 percent jump in June.
Annual growth in home values picked up to 11.1 percent, from 9.8 percent in June. Again, headline growth masked wide divisions between cities with much of the strength concentrated in Sydney and Melbourne.
For July alone, Sydney prices rose 3.3 percent and Melbourne leapt 4.9 percent. Annual gains in those cities were 18.4 percent and 11.5 percent respectively.
Markets were much cooler elsewhere, with Adelaide slipping 1.1 percent in the month and Perth up just 0.1 percent.
RPData head of research Tim Lawless noted that since home prices began to take off back in May 2012, Sydney had boasted gains of almost 48 percent while Melbourne added 32.1 percent.
In contrast, prices in every other city had grown by less than 13 percent.
Lawless also estimated that the total value of Australian housing had increased by just over half a trillion dollars in the past twelve months to reach A$6 trillion. That compares with outstanding housing debt of around A$1.3 trillion.
Regulators have reacted by tightening lending standards for property investment with the aim of keeping annual growth in credit at 10 percent or less.
Banks have responded in the last couple of weeks by pushing up mortgage rates for investment lending and increasing the size of deposits needed for loans.
The jury is still out on whether these steps will work given recent data showed credit advanced for home investment picked up to a 10.7 percent annual pace in June, the fastest in seven years.