SYDNEY - Australian home prices slipped for a second month in June as once red-hot markets in Sydney and Melbourne felt the chill from rising interest rates and a cost-of-living crunch.

Figures from property consultant CoreLogic out on Friday showed prices nationally fell 0.6% in June from May, when they dipped 0.1%. Prices were still 11.2% higher for the year reflecting the huge gains made over 2021 and early 2022.

The weakness was concentrated in the capital cities where prices dropped 0.8% in June, while annual growth slowed to 8.7% having been above 20% early this year.

The retreat in Sydney gathered pace as values fell 1.6% in the month, while Melbourne lost 1.1%. Annual growth in Sydney is down to 6%, a long way from the heady days of 2021 when prices rose by a quarter.

Most other cities were positive though again price growth is slowing. Adelaide led with a gain of 1.3%, but Brisbane eked out a rise of just 0.1% and Perth 0.4%.

The regions continued to benefit from a shift to country living and greater space, and prices rose 0.1% in June to be 20% higher than a year ago.

The slowdown in part reflects higher borrowing costs as the Reserve Bank of Australia (RBA) lifted rates in both May and June, and is considered certain to hike again next week in an effort to contain surging inflation.

"Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it's likely the rate of decline in housing values will continue to gather steam and become more widespread," said CoreLogic's research director, Tim Lawless.

Markets are wagering the current 0.85% cash rate could reach 3.75% by the middle of next year. The major banks have also sharply raised borrowing costs on fixed-rate mortgages and tightened lending standards.

A sustained drop in prices would be a drag on consumer wealth given the notional value of Australia's 10.8 million homes had risen A$210 billion ($144.86 billion) in the first quarter alone to reach A$10.2 trillion.

($1 = 1.4497 Australian dollars)

(Reporting by Wayne Cole; Editing by Sam Holmes)