After diving most of 2008, the number of loans committed for housing is now on the way up, according to the latest data from the Australian Bureau of Statistics.

The total value of owner-occupied housing commitments jumped by 7.1% in December 2008 compared to a 1.6% rise in November 2008. The largest increase in home loan volumes has been for the purchase of new dwellings, where on a seasonally adjusted basis the number of housing loans for newly constructed dwellings soared 15.2% over the month.

Mortgage Choice managing director Paul Lahiff said: "With the third consecutive month of data showing improved housing finance demand across major categories, we are confident the industry has passed a crossroads and is heading in the right direction, at least until the First Home Owner Boost has run its course".

The latest data also showed a dramatic increase in the number of first homebuyers back in the market. First homebuyers now account for a quarter (25.4%) of the total home loan commitments taken in December, compared to just 17% two years ago.

RP Data national research director Tim Lawless said: "The trend in the data is clear; the proportion of first homebuyers in the market hasn't been this high since December 2001. With interest rates likely to fall further and housing values remaining flat at best, I believe the Australian market should experience further improvements to affordability, which is likely to drive a recovery in the lower priced segments of the market."

Investor housing finance rose by 2.9% in December after dropping 6.8% in November 2008. Lawless said most investors are likely to be targeting the same housing stock as first homebuyers, due to the low-risk profile and the fact that these properties generally provide higher than average rental yields.

"The increased competition in this segment is likely to start placing upwards pressure on housing prices under $400,000 during 2009," Lawless said.

"With price pressure potentially on the horizon in the lower priced segments of the market and the fact that the increase in the First Home Owner Grant expires at the end of the financial year, first homebuyers may be feeling some urgency to buy into the housing market. Market conditions remain in favour of the buyer; however, as competition heats up buyers will start to lose some of the advantages the soft market conditions have provided," he said.