The number of loans to buy a new home rose 4.2 per cent in February, while commitments to build dwellings were up 2.6 per cent, Australia Bureau of Staistics (ABS) data, released yesterday, showed.
This compared with flat growth for loans to buy an established dwellings.
The share of first home buyers taking out mortgages rose to 26.9 per cent in February, the highest proportion of first home owners since the ABS data series started in 1991.
Westpac Economics stated that the market for home loans has rebounded in the past half year because of falling interest rates.
"Demand for housing finance has been in recovery mode for six months now as households respond to extremely low interest rates and generous incentives for first home buyers," Westpac said in a research note.
The number of overall housing finance commitments for owner-occupied housing rose by 0.4 per cent in February, seasonally adjusted, to 56,235, the Australian Bureau of Statistics said yesterday.
Although the rise in February was the fifth successive monthly increase, it was below the 2 per cent rise expected by financial markets but within the margin of error of the statistic.
In October 2008, the federal government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for new built homes.
Interest rates have now been cut by four and a quarter percentage points since last September, with the banks passing on most of that increase despite the latest partial pass on.
Mortgage Choice managing director Paul Lahiff said low interest rates and a shortage of rental properties had caused a surge in first time home buyers entering the market.
"A surge in enthusiastic first time buyers entering the market is persuading some investors to take a step back," Mr Lahiff said.
"It's an interesting decision, given the fact that low interest rates along with housing undersupply are forcing rental yields up."
"There is a shortage of rental properties right across the country and the expectation is that rents will continue to rise until housing supply improves."
JP Morgan economist Helen Kevans said first home buyers would continue to have an impact on the market for home loans, but expects a drop in the second half of 2009.
The federal government's boost to the first home owner's scheme is scheduled to end on June 30.
"They will likely dominate the market for the next few months," Ms Kevans said of first home buyers.
"That said, demand for housing finance will likely fall off towards the end of the year given the massive wealth destruction that is underway in the household sector."
Ms Kevans predicted 30,000 people were left jobless in March, pushing the unemployment rate to 5.4 per cent.
She forecast the unemployment rate to reach almost seven per cent by the end of this year, from 5.2 per cent in February.
"The rise in unemployment will really dampen housing finance, particularly in the latter six months of this year," she said.
"We are looking at a sharp rise in unemployment from here on towards the end of 2010."
The ABS will release the labour force figures for March on Thursday.
