House prices on the rise

AAP

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PROPERTY prices are continuing their march upwards, unaffected by five interest rate rises, economists say.

The Australian house price index rose 4.8 per cent in the March quarter, the Australian Bureau of Statistics said on Monday.

This compares with an downwardly revised 5.1 per cent in the December quarter.

In the year to March, the house price index rose 20.0 per cent.

The median market forecast was for the house price index to have risen 3.0 per cent in the March quarter, for a year-on-year rise of 18.0 per cent.

The stand out city was Melbourne where house prices rose 6.7 pct in the March quarter and 27.7 pct in the year.

But economists warn about taking the data at face value, saying that ABS measures appear prone to overstating price swings.

CommSec economist Savanth Sebastian said there was nothing too surprising in the data following five interest rate increases in the past seven months.

"It clearly highlights that the housing sector overall has probably taken the immediate rate hikes in its stride," he said.

"Property prices are still seeing strong growth and it's important to realise that this isn't going to be solved by raising interest rates."

Debt futures markets are pricing a 64 per cent chance of the Reserve Bank of Australia's (RBA) lifting the cash rate from 4.25 per cent to 4.5 per cent on Tuesday.

Mr Sebastian said the housing issue must be examined outside the prism of monetary policy, with a focus now on cutting taxes for the property sector and reducing barriers of entry for investors and developers.

He said the data on its own would not have a huge impact on the RBA board decision on Tuesday.

"It's probably still a 50/50 call," he said.

"Retail sales is still quite weak, building approvals has been weak over the past few months and similarly so has housing finance so I think there are indications that it's not all onwards and upwards for the Australian economy and you've still got those concerns out of Greece reverberating through the European zone."

CommSec has forecast the central bank will keep interest rates on hold until at least June.