Australia's home price growth slowed less than predicted in the three months to June, as interest rates climbed and buyer demand weakened.

In the June quarter, the weighted average capital cities house prices ascended 3.1 per cent, after a revised 4.2 per cent increase in the March quarter, according to the Australian Bureau of Statistics. In the year to June, prices edged up.4 per cent from 19.7 per cent in the year to March.

Analysts had forecast home prices to climb 2 per cent in the June quarter and 17.2 per cent in the year to June.

"The general trend in house prices is a moderation rather than an acceleration in house prices," said Macquarie economist Ben Dinte.

"We're seeing housing finance off sharply in recent months, auction clearance rates lower and also building approvals are coming off," he said.

"We don't expect it to be a severe correction in house prices - more like an extended period of softer growth with a flattish outcome."

Aside from interest rates, which edged up two times during the quarter to 4.5 per cent, the Australian property market faces a number of opposing forces.

Housing affordability has waned in recent years while the national median dwelling price ascended to levels out of the reach of many first home buyers.

In June, the national city median dwelling price slumped by $3000, although was still $465,000, according RP Data-Rismark.

Dwelling approvals saw a 3.3 per cent drop in June, the third consecutive month of declines. The volume of new home sales also plunged for a second month in June, indicating a recovery in construction, needed to boost demand for homes and alleviate the approximated 200,000 affordable home shortfall, remains far off.