Building approvals figures fell for the third month in a row in December but economists are confident that the housing sector will strengthen in 2014.
Approvals for the construction of new homes fell 2.9 per cent across Australia in December, but over 2013 they were up 21.8 per cent, the Australian Bureau of Statistics said.
A large rise in September had seen subdued results in October, November and December, but construction was still strengthening, JP Morgan economist Tom Kennedy said.
"What we are seeing at the moment is a little bit of payback from that big flow of approvals that we did see in September," he said.
"The monthly data for December is pretty soft across the board, with declines in single family dwellings and also high density dwellings.
"But it's important to look at the long term, over six months or so, and when you do that, there clearly has been a pickup in building approvals in the back half of 2013.
"The data does suggest activity in the construction sector has moved higher."
Approvals for private sector houses fell 3.4 per cent in the month, and the 'other dwellings' category, which includes apartment blocks and townhouses, was down 1.2 per cent.
Commonwealth Bank senior economist Michael Workman said interest rate cuts over the past two years are helping the housing sector.
"The current level of interest rates is extraordinarily low and they are doing what they usually do, which is stimulating housing lending, housing prices and construction."
"The data was weaker than expected but it still shows a very strong increase in construction activity is likely in 2014," he said.
Mr Workman doesn't expect the Reserve Bank of Australia to cut the cash rate in the foreseeable future, thanks to the housing sector's strength, but there are concerns about recent weak employment growth.
However, there seems to be a turnaround in business and consumer confidence and that should help the labour market later in the year, he said.
Other housing data released on Monday showed housing prices continued to rise, driven mainly by demand from investors rather than owner-occupier buyers.
Capital city home values rose 1.2 per cent in January for an annual rate of 9.8 per cent, according to the RP Data Rismark Home Value Index.
Rismark chief executive Ben Skilbeck said strong population growth, an increasing appetite for housing credit and positive consumer sentiment means that price declines are unlikely in the near term.
"Most noticeable is investor borrowing which for the calendar year 2013 grew by seven per cent compared to three per cent in 2011," he said.
"While we are yet to observe a significant increase in owner occupier borrowing, lending commitments to this segment for the month of November, the latest available, are 19 per cent higher than the same time last year."