New data released by the Australian Bureau of Statistics on Wednesday showed that the overall volume of owner-occupied housing slid to its lowest level since April 2001 as housing finance commitments declined by 3.4 percent in March to 48,260 following the government's withdrawal of its stimulus suite grants for first home buyers.

Commonwealth Bank senior economist Michael Workman said that prospective buyers abandoned the market as soon as the federal government withdrew its first home buyers grant, telling AAP that "the weakness in the data over the past six months has been the withdrawal of the first home buyers' scheme."

He added that the developing trend in the market seemed leading to fewer first home buyers and more second home buyers and the "evidence coming from real estate agents is that the activity in the market is mostly from people who are trading up."

The federal government slashed the first home buyers grant to $7,000 in December following the Reserve Bank of Australia's (RBA) move to lift the cash rate by 3.75 though Mr Workman reiterated that the property market had generally evaded the effects of rate hikes.

He expressed confidence that the ABS data will not impact on RBA's rate policy for the next few months and predicting at the same time that the cash rate currently in effect will further spike as the year approaches its last few months.

For his part, Nomura Australia chief economist Stephen Roberts viewed the ABS data as good indicators for housing activity prospects for most of 2010, believing that "the heavily leveraged housing sector is vulnerable to rising interest rates."

He noted that the new data showed that the average loan size for an owner occupied home ballooned from $6,700 to $281,400 in the month and signs are showing too that banks would eventually restrict the flow of housing loans as they are slowly eating up their lending records.

Mr Roberts told AAP that the ABS data further suggests that the RBA will have to reconsider its cash rate policy and may have to pause for another lift at least until the last quarter of this year, as he pointed that total housing finance by value declined by 1.4 percent to $20.177 billion in March.

JP Morgan's Helen Kevans generally agreed with the two economists as she told AAP that the data is within her expectations of a 3.5 percent drop in owner-occupied finance owing to RBA's belt tightening as she predicts that such trend will be sustained until year end again due to first home buyers' grant expiry.

She said that the government has already imposed price caps on home loan grants by the start of 2010 and this move had discouraged first home buyers from availing of the home grants, as she noted that property investors are in turn increasing with ABS data showing that housing finance for investment purposes spiked by three percent to $6.644 billion in March.

Ms Evans told AAP that these are clear signals that RBA's rate policy has started sinking its teeth on home loan demands and an "RBA pause next month will allow them more time to assess the impact of the rate hikes they've already implemented."