There are further signs of heat coming out of the east coast housing market, with Sydney and Melbourne leading a 1.1 per cent fall in property prices across Australia's five largest cities this month.

In a preview of its monthly home value index, CoreLogic said the 1.1 per cent fall indicated a negative month-on-month result for May.

"The weak preliminary result is largely influenced by a month-on-month fall in Sydney and Melbourne dwelling values," CoreLogic's head of research Tim Lawless said.

"However, when seasonal factors are taken into account, the May result isn't likely to be as weak as what the headline results are indicating."

Mr Lawless said trend growth rates showed the pace of capital gains had moderated from recent peaks, which was happening while mortgage rates were rising, auction clearance rates were softening, market sentiment was deteriorating and investment activity was slowing.

The preview does not separate house and unit prices.

Since late March, banks have slammed the brakes on new lending to customers taking out interest-only loans, after a crackdown from financial regulators who fear an overheating housing market.

The crackdown has prompted banks to raise interest rates on interest-only loans, and increase the minimum deposit required for customers borrowing on an interest only basis.

Figures from the Australian Prudential Regulation Authority on Tuesday showed interest-only lending was slowing even before the regulator announced its latest restrictions, which limit new interest-only lending to 30 per cent of loan approvals.

Interest-only loans made up 36.2 per cent of new loan approvals in the March quarter, down slightly from 37.5 per cent in December, the APRA figures show.

The figures came as approvals for new projects sank 17.2 per cent in the year to April, a turnaround that could undermine policymakers' hopes for solid economic growth over the next two years.

Building approvals have been on a decline since last August, with the once-booming apartment sector the biggest hit, data from the Australian Bureau of Statistics shows.

Data published on Tuesday shows a better than expected gain of 4.4 per cent in the month of April, but it follows a hefty loss of 10.3 per cent in March.

Multi-unit approvals rose 9.6 per cent in April from March when they slumped more than 18 per cent. Apartment approvals are still down an annual 26.5 per cent.

Analysts say the data indicates Australia's biggest-ever construction boom is slowly unwinding.

"While the monthly update was more positive than expected the slowdown theme remains clear," said Matthew Hassan, senior economist at Westpac Banking Corp.

"New dwelling investment is expected to enter a decline from late this year, becoming a material drag on growth."

The Reserve Bank of Australia (RBA) has been counting on continued strength in home building to offset a lingering drag from the end of a mining investment boom.

Earlier this month, the RBA even upgraded its forecast for gross domestic product (GDP) growth by 25 basis points for mid-2018 to 2.75-3.75 per cent.

Growth in the $1.7 trillion economy is expected to accelerate to between 2.75 per cent and 3.75 per cent by June 2019.

But economists are not so optimistic.

"It is hard to see that kind of growth," said Michael Turner, strategist at RBC Capital Markets.

"We are a bit more circumspect. Consumer spending is still a bit more conservative and construction is slowing down. We're seeing GDP of below 3 per cent over the next two years."

with Reuters