Home prices in Australia continued to climb in January with Melbourne leading the charge, according to the RP Data-Rismark Home Value Index released on Monday. The latest index showed Australia's capital city home values rose 1.2 percent in January and 9.8 per cent in the year to January. Capital city dwelling values are now 4.8 percent higher than their previous peak in October 2010, the latest index results revealed. Prices in Melbourne jumped 3.2 percent in January, well ahead of Sydney's 0.8 percent gain. RP Data research director Tim Lawless said Sydney and Melbourne were the clear drivers for capital gains over the past year, with values up 13.4 percent and 11.9 percent respectively over the 12 months to January 2014. "Excluding Perth, every other capital city has recorded growth of less than five percent over the past year," he said in a statement. Perth prices, however, declined 1.1 percent in January but gained 6.9 percent over the past year. Lawless said the strong figures were likely to dampen further speculation about a cut to interest rates from the Reserve Bank of Australia (RBA) over the short to medium term. "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," he said. According to Lawless, eroding rental yields in Sydney and Melbourne may potentially start acting as a disincentive to investors. "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 Officer Ben Skilbeck said home prices in Sydney and Melbourne are unlikely to decline 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.