Australian house prices rose solidly in the first quarter of the year as record-low interest rates fueled strong gains in capital city values, causing growing concerns of a property bubble.
The weighted average price of residential property across Australia's capital cities rose by 1.6 per cent over the three months to March, according to the Australian Bureau of Statistics.
Over the year, house prices in capital cities have increased by 6.9 per cent.
Concerns of a speculative property bubble in Sydney and Melbourne have ballooned recently, as the low interest rate environment encouraged a surge in property investing in the cities.
In a bid to stimulate the sluggish economy, the Reserve Bank of Australia trimmed the official cash rate to 2.25 per cent in February, what was then a record low rate. The RBA cut rates further to 2 per cent at its May board meeting.
In Sydney, house prices rose by 3.1 per cent in the March quarter, and have surged by 13.1 per cent over the year.
Meanwhile, house prices in Melbourne lifted 0.6 in the quarter for a rise of 4.7 per cent over the year.
The RBA and the Australian Prudential Regulation Authority, have said they are monitoring activity in the property markets. A number of lenders recently moved to end investor-lending discounts on home loans.
Treasury Secretary John Fraser recently told a parliamentary committee there was "unequivocally" a housing bubble in Sydney, while RBA governor Glenn Stevens remarked that house prices in some pockets of the market were "crazy".
Brisbane house prices increased 0.4 per cent over the March quarter, and by 3.9 per cent over the year.
Adelaide posted a lift of 0.7 per cent for the quarter and 2.5 per cent for the year, while house prices in Canberra gained 1.1 per cent in the quarter, and were up by 3 per cent for the year.
Hobart house prices lifted 0.5 per cent in the quarter, and by 1.9 per cent over the year.
Perth recorded a 0.1 per cent fall in the quarter, resulting in a 12 month house price dip of 0.3 per cent, as the fading mining boom weighs on home prices.
In Darwin, house prices retreated by 0.2 per cent in the three months to March and by 0.4 per cent over the year.
The mean price of a residential dwelling rose by $8,400 in the March quarter, the ABS said, reaching an average price of $576,100.
The number of dwellings increased by 38,200 over the three months to March.