Home building approvals hit a five-month high at the end of 2015, but economists warn the monthly rollercoaster ride may be levelling out.
Approvals for the construction of new homes jumped 9.2 per cent in December, following a sharp 12.4 per cent dive the month before.
JP Morgan economist Tom Kennedy says such big monthly swings should be analysed with caution, and approvals are still slowing.
"Out of the past six months we've had (almost) three double digit fluctuations," he said.
"It's a very very volatile series, so treat these magnitudes with a grain of salt."
December's gains were driven by a surge in high density approvals, Mr Kennedy said.
Homes categorised as `other', including apartments and townhouses, jumped 12.8 per cent in the month, and private sector houses rose 5.4 per cent.
Mr Kennedy said that momentum can't be sustained.
"The construction sector will cool a little in 2016, this number doesn't change that," he said.
"We think the underlying theme of moderation and normalisation is likely to prevail this year."
Over the 12 months to December, building approvals were down 2.5 per cent, the Australian Bureau of Statistics said on Wednesday.
Residential approvals have been slipping for eight months in trend terms, and are now eight per cent below their April 2015 peak, ANZ economists said.
But approvals in 2015 hit a record high for a calendar year, the best result for the "first leg in the building pipeline" in 35 years, CommSec economist Savanth Sebastian said.
"It's a solid reversal from the previous month and it just highlights that there's a lot of building work to be done over the next year," he told AAP.
"It will also bring much more balance to the housing market in terms of supply and demand."
AMP Capital chief economist Shane Oliver said housing construction activity will remain at historically high levels in the year ahead, but its contribution to economic growth will slow.
"The Reserve Bank will cut interest rates again in the months ahead, but today's data will do nothing to speed this up," he said.
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