Australian house prices fell 1.7 per cent in the March quarter, national official data showed.

This decline in the first quarter records the most since 2008 as higher borrowing costs curbed demand and floods disrupted the property market in Queensland state.

It compared with an upwardly revised 0.7 per cent rise in the house price index for the December quarter.

In the year to March, the index fell 0.2 per cent, the Australian Bureau of Statistics said on Monday.

Analysts had forecast a slump of 0.5 per cent in the March quarter. The market also anticipated a year-on-year rise of 1.6 per cent.

Quarterly, the capital city indexes decreased in Melbourne, Sydney, Brisbane, Adelaide, Canberra and Darwin, and increased in Perth and Hobart.

But in annual terms, house prices increased in Melbourne by 1.1 per cent, Canberra by 1.1 per cent, Adelaide by 0.9 per cent, Sydney by 0.8 per cent, Hobart by 0.6 per cent, and Darwin by 0.5 per cent, and decreased in Brisbane by 3.6 per cent and Perth by 3.2 per cent.

Although the Reserve Bank of Australia is widely expected to hold the benchmark interest rate at 4.75 per cent in May, it may strike a hawkish tone for future policy as price pressures intensify.

According to Credit Suisse overnight index swaps, market participants are pricing a zero percent chance for a rate hike this time around, but see the interest rate increasing by at least 25bp over the next 12-months as growth and inflation accelerate.