Homebuyers rushed to sign on the dotted line in December ahead of the banking regulator's crackdown on home lending practices.
The number of home loans approved in December rose 2.7 per cent, beating market expectations, and the strongest rise in 18 months.
Loans approved for investment housing were up six per cent to over $12.3 million, which is double the level for 2011.
In December the Australian Prudential Regulation Authority (APRA) announced that it would more closely supervise lending practices to prevent risky loans and to combat excessive lending to property investors.
Macquarie Research economist James McIntyre believes the large monthly jump is a one-off and puts in down to people getting their loans approved before APRA gets tough.
"We'll see this surprisingly strong outcome reversed or normalised over the coming months as the restraints on investor lending in particular begin to come into effect," he said.
Mr McIntyre said the increasing supply of new homes should keep a lid on prices and maintain the affordability of housing in most of Australia.
"If there is any residual strength or frothiness in the market, the introduction of macroprudential tools - some of those curbs on foreign investors - and a very strong supply pipeline suggest that some of that heat may come out of the market as the year plays out."
In the December report, the ABS revised the way it estimates the number of loans granted to first home buyers, because some lenders were only reporting loans to those who had received a first home owner grant.
Housing Industry of Australia economist Diwa Hopkins said things don't seem to be as dire for this category as first thought.
"In 2014, lending to first home buyers accounted for around 15 per cent of the total. This is higher than a decade ago," she said.
"The key to housing affordability for first home buyers and trade-up buyers alike is a supply of dwellings commensurate to the needs of a growing population."
However, Moody's Analytics said that the strength in the housing market has mainly been a Sydney story and doesn't believe that the city's housing market will cool.
Sydney was the only capital city to register double digit prices rises in the last two calendar years.
"Sydney's well-documented supply limitations have helped to support price growth," Moody's said.
"Sydney is constrained geographically... public transport and amenities are patchy, pushing prices in desirable areas higher."
The ratings agency said that government approval for new developments has been slower in Sydney than in Melbourne, even though Victoria's population is 22 per cent quarter smaller than NSW.
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