Bloomberg had expected the number of housing finance commitments to lift by one per cent in the month. Total housing finance by value rose 4.1 per cent in October, seasonally adjusted, to $26.486 billion. "It looks like another fairly solid outcome,"

National Australia Bank senior economist Spiros Papadopoulos said. "It's another indicator that points to the recent strength that we've seen in the housing market and growth in the investor sector. "If you line that up with the building approvals data, which has seen quite a lot of growth in multi-level dwellings, or apartments, that suggests we're seeing a lot of investor activity in apartments coming through. "It's a comfort to the Reserve Bank that low interest rates are working and with no interest rate rise on the horizon any time soon, you'd expect that housing finance approvals and other housing indicators continue to trend higher in coming months.

"JP Morgan economist Tom Kennedy said he was encouraged by the increases in housing finance for the purchase of new dwellings, and the construction of dwellings.

"When you look at the breakdown it was fairly broadbased," he said. "Construction loans, which is the one that the Reserve Bank of Australia has been targeting, trying to get a bit of a lift in that sector, they were up about 1 per cent and that is its third consecutive monthly increase, there are tentative signs of life in that sector.

"This is really representative of strength in the housing market and the continual demand for property." Mr Kennedy expects the housing sector to continue strengthening in the new year. "We don't think at this stage that the uptick in house prices has been too much of a concern for the RBA and activity is coming off pretty low levels, so we think it has a while to run," he said.

Source: The Australian