The RBA is likely to view the softening in housing market conditions as a welcome outcome and confirmation that macro-prudential measures have done the heavy lifting to cool the rapid pace of capital gains across the Sydney and Melbourne housing markets.
CoreLogic’s hedonic home value index reported the first month-on-month decline in Sydney dwelling values since March last year when the previous round of APRA regulatory changes were flowing through to credit policies and reducing investor participation.  
That previous slowdown in housing market growth reversed when the cash rate was cut in May and August last year and investment credit growth accelerated.  No such lifeline is likely to eventuate this time around, and in all likelihood, we will continue to see the trend rate of growth easing across the Sydney and Melbourne housing markets.  While the outlook for the domestic economy has improved, growth in wages and inflation remain subdued.  Additionally, a cooling housing market should ease some of the pressure on the Reserve Bank to push the cash rate higher.
Given that debt levels are at record highs relative to household incomes, household demand is likely to be sensitive towards higher interest rates.