Sales of new detached homes have fallen 2.1 per cent nationwide but Australia's home building industry body believes any continuing downturn is likely to be modest.
Housing Industry Australia says a 5.7 per cent drop in NSW and a 4.4 per cent fall in Victoria in January had dragged down the national average.
Sales are down 14.9 per cent from their peak of three years ago but, the HIA says, lender rate rises and other measures in response to APRA limits on investor mortgages have largely been affecting demand for new apartments rather than detached homes.
"Owner occupiers have, in some instances, seen improvements in credit conditions, with first-home buyers in particular enjoying enhanced incentive schemes at the behest of various state governments," the HIA said in a report.
"This is supporting demand for new low-density housing, including detached houses, and will ensure the forthcoming down cycle is a relatively modest one."
The HIA on Friday also noted that building approvals for detached houses in NSW and Queensland had finished 2017 on a stronger note, rising by 5.9 per cent and 6.6 per cent, respectively, in December - although they dipped 5.3 per cent in Victoria.
Detached home sales for January rose 1.0 per cent in Queensland, 4.6 per cent in SA, and 1.2 per cent in WA.
"The most encouraging news this month is that new home sales in Western Australia picked up," the HIA said.
"After declining by more than 23 per cent in 2017, this growth in sales is the first sign that conditions in that market are improving."
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