Home prices across Australia's capital cities fell in May for the first time in six months, likely a welcome development for policymakers keen to take the heat out of inner city markets in Sydney and Melbourne. Figures from property consultant CoreLogic RP Data showed home prices across all of Australia's major cities dropped 0.9 per cent in May, from April when they rose 0.8 per cent. Prices fell across most cities with Sydney off 0.7 per cent in the month and Melbourne 1.7 per cent. Yet annual growth in home values still picked up to 9 per cent, from 7.9 per cent in April, while Sydney stayed far in front with a gain of 15 per cent. "The negative May result is likely due to a natural correction from the previously strong month-on-month results," said RP Data head of research Tim Lawless. "Added to this is the market stimulus due to lower interest rates, and a well-received federal budget in May - all of which are likely to keep momentum going in the market." The scale of speculative demand for housing has unsettled the Reserve Bank of Australia, which fears it could ultimately push prices to peaks that threaten a sharp pullback. Regulators have tightened coverage of lending standards for property investment and there are signs banks are slowing growth in their mortgage books. So far, the Reserve Bank has expressed confidence that tighter regulation will eventually cool the housing market, which is one reason it felt able to cut interest rates to an historic low of 2 per cent last month. The central bank was due to hold its June policy meeting yesterday and was considered almost certain to hold steady.