Weak housing finance data for November suggests recent interest rate cuts from the central bank have done little to stimulate activity in the property market, economists say.
The number of home loans approvals fell 0.5 per cent to 46,199 in November, the Australian Bureau of Statistics said this morning.
The result was well below market expectations of a half per cent improvement in the month.
Loans to buy new properties fell a seasonally adjusted 10.3 per cent, while loans to build new homes fell 1.8 per cent.
On a brighter note, loans to buy existing houses edged 0.3 per cent higher in November, the ABS said.
JP Morgan economist Tom Kennedy said data was very soft "across the board" and showed the Reserve Bank of Australia's interest rate cuts had not given the property market the boost many had been hoping for.
"By simply lowering the cash rate I don't think that's really solving too much at this stage," Mr Kennedy said.
"The broad-based weakness is going to continue for a little while longer until the structural changes that are occurring in the economy continue to play out."
Mr Kennedy said cautious households were continuing to pay down debt, rather than take on new debt.
"Before you can see any sort of broad-based pickup in the housing sector across the board you are going to have to see that deleveraging out process continue for some time yet," Mr Kennedy said.
The RBA cut the cash rate by 25 basis points to three per cent in December, levels not seen since the global financial crisis.
The central bank has delivered 175 basis points of rate cuts since November 2011.
The RBA traditionally does not meet in January and is due to hand down its next interest rate decision on at 11.30am on Tuesday, February 5.
JP Morgan expected the RBA to drop the cash rate to 2.75 per cent at its February meeting.
The local currency reacted negatively to the data.
At 9.25am, the Australian dollar was trading at 105.24 US cents down from 105.40 US cents at 8.03am, shortly before the data was released.
But Westpac senior economist Andrew Hanlan said the figures had been distorted by a 17 per cent fall in loans to first home buyers, driven by changes to state-based incentive schemes.
He said changes to first home owner grants in New South Wales, which came into effect from October 2012, had a particularly strong impact on the numbers.
"What we saw in November was a particularly sharp reversal in the first home buyers market," he said.
"But we certainly expect to see home buyers responding to the improved housing affordability, once we move through this period of volatility."
Mr Hanlan said the figures showed lower interest rates were luring investors back into the market.
He said home loans to investors were up 12 per cent over the past three months.
"We certainly have seen investors responding and entering the market at greater numbers in response to lower interest rates."
Mr Hanlan said the figures suggested a recovery was under way in the housing sector.
"But there is still a question mark as to how rapid the recovery in the housing market will be," he said.