The latest survey of capital city home prices shows the Australian property market is starting to pick up, with prices recording their largest quarterly rise since May 2010.

The RP Data-Rismark Home Value Index shows that capital city house prices rose on average by 2.8 per cent in the March quarter.

For the month of March, home values increased overall by 1.3 per cent.

RP Data research director Tim Lawless says it was the strongest quarterly result in nearly three years.

"So it really does look like the housing market is continuing on its recovery trend, although there's still about another 3 per cent of value growth to go before we get back to levels that we didn't see since December 2010," Mr Lawless said.

Property prices over March quarter Capital city Change in value Sydney +3.4% Melbourne +2.5% Brisbane +1.9% Adelaide -0.5% Perth +4.3% Hobart +6.1% Darwin +2.4% Canberra +3.8% Read more: Interest rates stay on hold

Across the country, the largest rise for the March quarter was in Hobart, where values increased by 6.1 per cent to a median price of $332,500, followed by Perth (4.3 per cent) and Canberra (3.8 per cent).

In Sydney, Australia's largest and most expensive capital city housing market, home values rose by 3.4 per cent to a median price of $550,500, beating a record high reached in November 2010.

In Adelaide, home values declined by 0.5 per cent in the quarter, making it the only capital city not to record improved prices.

Mr Lawless says while the figures are encouraging, he doubts this pace of growth can be maintained through the year.

"The RBA would be concerned if we did see this level of growth sustained in the housing market," he said.

"Personally I believe we'll probably see growth rates moderate over the coming months. If you annualise that 2.8 per cent quarterly growth rate out over the year then you're looking at double-digit growth over the 2013 calendar year, which I think is probably a bit of a high estimate."

Commsec chief economist Craig James said the figures were "by no means a sign of a boom" in house prices.

"Home prices are only at record highs in the Sydney market, and it could take another year for other capital city prices to return to peak levels," Mr James said.

"Given that home prices in most of Australia are still rising at a slower rate than wages and there appears good balance between housing demand and supply, Reserve Bank policymakers wouldn't be fazed at latest developments."

RP Data says auction and private treaty sales have also recorded strong results in the period.