The number of people applying for home loans slumped for a third straight month in December, undermining hopes of a recovery in the housing sector and adding to the case for further interest rate cuts.
The number of home loans approved in December was down 1.5 per cent compared to November, according to figures released by the Australian Bureau of Statistics on Monday.
In dollar terms, the value of home loans taken out in the month was down 2.7 per cent.
JP Morgan economist Ben Jarman said the figures suggested the much-hoped-for recovery in housing - and especially in the housing construction sector - had not occurred by the end of 2012, despite a string of interest rate cuts.
The Reserve Bank of Australia cut the cash rate by 1.75 percentage points between November 2011 and December 2012.
"While the RBA has been talking about getting preliminary signs that the economy is getting a bit of traction in the expected spots as rates come down, it doesn't seem that anything really compelling is really happening," he said.
The RBA is counting on sectors like housing construction, manufacturing and retail to pick up during 2013 as the mining-investment boom peaks.
Master Builders Australia chief economist Peter Jones said the figures showed further rate cuts were needed.
He said that, while there were some good news in the figures, including a 1.2 per cent increase in construction of new dwellings, the sector was continuing to struggle.
"With consumers still reluctant to commit to large investments, the Reserve Bank should give urgent consideration to a rate cut at its March Board meeting," Mr Jones said.
National Australia Bank senior economist Spiros Papadopoulos said the RBA was still waiting for the full effect of its 2011/12 rate cuts to work through the economy.
But he said weakness in housing, and other non-mining sectors, meant further rate cuts were likely.
He said the continued fall in first home buyers would be a concern for the RBA.
First home buyers made up 14.9 per cent of those taking out loans in December, down from 15.8 per cent in November and 21.1 per cent a year ago.
"When you think about the construction side of things and the fact the RBA wants dwelling investment to start improving, a lot of that momentum would normally come from first home buyers," he said.
Among the states, New South Wales recorded one of the biggest falls in home loans, with loans for owner occupation down 3.2 per cent in December.
The Northern Territory recorded the sharpest decline, with home loans down 11.2 per cent, albeit off a relatively small base.
Victoria (up 0.3 per cent) and South Australia (up 1.1 per cent) were the only states to record an increase in home loans.
