Home lending in Australia continued to strengthen buoyed by demand from first homebuyers and investors according to a new data.

The latest housing finance figure from the Australian Bureau of Statistics showed the number of new housing loans climbed by 2.2% in May to its highest level in more than a year. Loans for new dwelling construction recorded an 8% jump, while lending to buy new dwellings rose by 2.9%.

"The latest round of housing finance figures has reinforced the strength of the housing sector," said Savanth Sebastian, economist with CommSec. "The sustained improvement in overall housing activity and more importantly, the substantial jump in construction of new dwellings, will have multiplier effects throughout the economy. The sharp lift in home construction should ensure economic growth remains well supported."

Mortgage Choice CEO, Michael Russell added that housing market participants should be buoyed by the all-encouraging May ABS figures, especially with the significant growth in housing finance for the construction of dwellings and purchase of new dwellings.

"Hopefully this increased demand for property lending translates into greater job security for the housing sector and those who service it. Positive results are always welcome in the volatile economic environment we are still experiencing, notwithstanding the noticeable return to optimism over the last couple of months.

"It is also fantastic to see the number of first homebuyer commitments as a percentage of owner occupied housing finance commitments increase from 28.6% in April to 29.5% in May. The total number of dwellings financed for this group rose too, from 17,624 to 19,527. This is what some would see as a surprise return, given that number fell between March and April," he said.