Property prices in Australian capital cities fell 1.5% in November, but were up 8.7% for the year. According to Craig James, chief economist CommSec, the monthly fall was the first decline in six months, and the biggest fall in 18 months.

Melbourne property fell the hardest for the month, with prices slumping 3.5%, though they were still up 11.8% for the year.

Sydney property eased 1.4% in November, but remain up a hefty 12.8% for the year.

Five out of eight cities recorded declines for the month, but only two cities recorded declines for the year, with Perth prices falling 4.1% for the 12 months to November, and Darwin prices slipping 4.2%.

Rental yields were also in decline. Sydney and Melbourne were Australia's worst performing cities for gross rental yield. Sydney's gross rental yield for the year was 4.1%, while Melbourne's yield was 3.0%. The best performing markets for yield were Darwin, with a yield of 5.5%, and Hobart with 5.4%. 

Higher interest rates and tighter lending criteria for investors, as well as a natural correction after strong gains, are behind the softer prices. 

Tim Lawless, CoreLogic RP Data head of research, said, 'The fact that mortgage rates have risen independently of the cash rate has, in all likelihood, become a contributor to the slowdown in housing market conditions, as well as tighter lending practices evidenced by a recent reduction in lender risk appetite for investment loans and high loan-to-valuation-ratio mortgages. Tighter mortgage servicing criteria across the board and affordability constraints in the Sydney and Melbourne markets are also having an impact on market demand.'

The confirmation of a softening in the property market comes as the Reserve Bank left the cash rate at 2.0%.

In his statement accompanying the decision, Governor Glenn said, 'Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market. The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities.'