In what building industry groups in Australia are hailing as a further sign of strengthening conditions in residential construction, a key indicator of lending activity for new housing has soared to three its highest level in more than four years.

On a seasonally adjusted basis, the combined number of loans made for either the purchase or construction of new homes rose by 1.9 percent to come in at 8539 – the highest level on record since the final month of the boost to the federal government’s home building incentive program in December 2009.

Construction loans rose 1.0 percent (seasonally adjusted) to come in at 5,546 whilst new home purchase loans rose 3.6 percent to reach 2,993.

Building industry groups welcomed the latest result.

Noting that six out of eight states and territories contributed to the growth in construction lending in the owner occupier segment, and that duel growth was evident in demand from both owner occupiers and investors, Housing Industry Association Chief Economist Harley Dale says the figures reinforce a positive sign for new home building activity throughout the first part of next year.

“This is an important tick in the box for the residential construction outlook as the first round new home building recovery in 2012/13 was narrowly driven with only two states – New South Wales and Western Australia – accounting for the bulk of the growth” Dale says, referring to the relatively geographically broad based nature of the latest increase.

Noting that investment loans for dwelling construction are up 64 percent in trend terms year on year whilst owner occupied approvals for the construction and purchase of new dwellings are up 12.4 percent over the same period, meanwhile, Master Builders Australia Chief Economist Peter Jones says the figures confirm the previous month’s rise was no aberration and the recovery in residential construction has strong momentum.

However, there were some negatives, with housing loans relating to first home buyer activity remaining subdued and the value of loans for large additions and alterations having fallen 5.1 percent over the past three months (not seasonally adjusted) even as renovations investment is already at ten year lows.

The latest figures follow Friday’s release of the Performance of Construction Index showing the second consecutive month of expansion in the sector following several years of decline.