Despite housing loan rates showing signs of improvement, economists predict that numbers will again slow down in the coming months as mortgage interest rate rise.

According to the Australian Bureau of Statistics, housing-finance approvals in the country increased by 1.9 percent in October while September figures are expected to also be positive making it the fourth consecutive month. It added that building approvals also increased by 9.3 percent during the same period compared to the previous month.

First-time homebuyers have stayed away momentarily because of rising interest rates, comprising of only 15.4 percent of loans approved in October. The Reserve Bank of Australia recently hiked interest rates to stem inflation. So far, its assured that interest rates will stabilize until mid-2011.

"It precedes the double-whammy rate hike in November. The bottom-line is that lending for home construction was already weak ahead of the last rate hike," added Craig James, chief economist at CommSec. "So an extended period of interest rate stability will be required to breathe life into the home construction market."

"Three to four months ago we would have been getting 30 to 40 groups coming through every week in the inner west for mid-range properties, now we are averaging four or five groups coming through," said Sydney real estate agent Charles Bailey. "The market has come down about 10 percent in the past month or so."