The rise in the Data-Rismark Hedonic Australian Home Value Index came on top of an upwardly revised 1.7% increase in February. Home prices are up 12.5% on March last year.
Detached house values increased by 4.5% over the first quarter while unit values gained 3.4%. The median house price was is A$480,000 (RM1.43 million) in capital cities, while the median unit price was A$400,000.
This series is based on the largest property database in Australia and is well regarded by analysts. It also points to another strong rise in the government's quarterly measure of house prices due out on Monday.
RP Data-Rismark also released seasonally-adjusted data which showed a 1.1% increase in prices for March and a more moderate 2.9% rise for the quarter as a whole.
"The housing recovery has remained surprisingly resilient in the face of sustained interest rate hikes," said Rismark CEO Christopher Joye.
The Reserve Bank of Australia (RBA) has lifted interest rates by 125 basis points to 4.25% since October, and mortgage rates have risen even faster. The revival in home prices is one reason the central bank felt rates no longer needed to be so low.
"The lively capital growth observed in the major cities runs against the grain of relatively anaemic housing finance flows," added Joye.
"This implies that underlying demand- and supply-side fundamentals are driving Australia's housing rebound, as opposed to simply credit."
However, there were signs higher interest rates were beginning to bite, particularly in the less expensive suburbs.
Over the last year, the most expensive suburbs had recorded a 16.6% gain in values compared to just 7.8% across the most affordable suburbs.
"We expect capital growth rates to cool in 2010 as the cost of mortgage finance is normalised by the RBA," said Rpdata.com director of research, Tim Lawless.
"Over the longer-term, home values should be expected to track disposable incomes."
Prices outside the major cities were much more subdued with no growth in March and a 5.3% rise over the previous 12 months. Capital city markets represent just 0.5% of the national landmass but account for around 60% of home sales. - Reuters