However, demand for home loans eased slightly in February, declining 0.4 per cent to $28.6 billion, after striking a record high the previous month.
But while the value of new loan commitments for owner occupier housing fell 1.8 per cent in February 2021, it remained 55.2 per cent higher than in February 2020, Australian Bureau of Statistics figures show.
First home buyer loans for owner occupiers decreased 3.3 per cent, but were still 65.8 per cent higher than a year earlier.
"This is still a very hot property market," financial comparison site Canstar's Steve Mickenbecker said.
"Real estate stock is racing off the shelves and estate agents are on the streets soliciting new listings with the enticement of prices home owners have never dreamed of."
The CoreLogic national home value index recorded a 2.8 per cent rise in March, the fastest rate of appreciation since October 1988 and with strong growth conditions across the country.
Sydney prices have now grown 6.7 per cent in the past three months.
"The last time Sydney housing values recorded a quarterly trend this strong was in June-July 2015," CoreLogic research director Tim Lawless said.
"Following this brief surge, the pace of growth rapidly slowed as limits on investor lending kicked in to slow the market."
Financial regulators are keeping a close watch on the latest housing market developments.
The two biggest markets, Sydney and Melbourne, have made a "remarkable recovery", Mr Lawless said.
Sydney dwelling values are now 2.6 per cent higher than their July 2017 peak, having dropped 14.9 per cent to May 2019 and the further 2.8 per cent during the COVID-19 downturn.
Similarly, Melbourne housing values have recovered from the 11.1 per cent fall between 2017 and 2019, and the 5.6 per cent drop in values through the worst of the virus-related downturn, to set a new record high in March.
For the first time in a year, growth in capital city housing values outpaced the regional markets.
CoreLogic's combined capital cities index recorded a 2.8 per cent lift in March compared with the 2.5 per cent gain seen across the combined regionals index.
However, this renewed strength in house prices, buoyed by record low interest rates, is raising concerns over housing affordability.
Everybody's Home - a national campaign to end homelessness - warned spiralling prices would hit both aspiring buyers and renters, and said an expansion of social and affordable housing was badly needed.
"More social housing would better balance the housing market, creating more options for those who can't participate in the boom," national spokeswoman Kate Colvin said.
"Higher house prices fuelled by cheap money will lead to increased costs in the rental market, worsening affordability."