Home prices have continued to climb in January with Melbourne leading the charge.
Capital city home values rose 1.2 per cent last month and 9.8 per cent in the year to January, according to the RP Data Rismark Home Value Index.
Prices in Melbourne rose 3.2 per cent in the month and almost 12 per cent in the year to January while prices in Sydney rose 0.8 per cent in January for a yearly rise of 13.4 per cent.
Home values are now 4.8 per cent higher than their previous peak in October 2010, the figures show.
The strong figures were likely to dampen speculation about any possible cash rate cuts from the Reserve Bank of Australia in the medium term, RP Data research director Tim Lawless said.
"Together with the higher-than-expected inflation reading and a lower Aussie dollar, the sustained growth in dwelling values is another factor the RBA is likely to consider when deliberating on any movement in the cash rate," Mr Lawless said.
Sydney and Melbourne were the clear drivers of growth, Mr Lawless said.
But, he said, the figures showed that both capital cities were well advanced in their growth cycle and the current exuberant conditions were expected to wind down in 2014 because of increasing affordability constraints and higher levels of housing supply.
Perth prices declined 1.1 per cent for the month of January, as did Darwin, while Adelaide was flat.
However Perth prices were up 3.1 per cent on a quarterly basis and up 6.9 per cent year on year.
Eroding rental yields, as dwelling values continued to grow faster than rental rates, could start acting as a disincentive for investors, which would also moderate price growth, Mr Lawless said.
"With gross yields low in Melbourne, and not a lot better in Sydney, together with the fact that both these markets are well advanced in their growth cycle, it would suggest that investment fundamentals in these markets are waning," he said.
"It is my view that investors will start seeking out the higher yields of Brisbane where the market is also far earlier in the growth cycle."
Rismark chief executive Ben Skilbeck said price declines were unlikely in the near future.
"While a moderation in growth is expected for Melbourne and, to a lesser extent, Sydney, strong population growth, an increasing appetite for housing credit and positive consumer sentiment means we are unlikely to see price declines in the near term," he said.