The Australian Industry Group-Housing Industry Association's performance index of construction industry activity in December had its fourth-straight monthly rise.
The figures pushed up the Australian dollar as traders raised the odds the Reserve Bank of Australia will increase interest rates to 7 per cent in a month.
Non-residential markets were the chief driver for the rise but housing-starts activity late last year expanded compared with sluggishness seen up to September 2007.
Housing Industry Association economist Harley Dale said: "We should see a modest pick-up in home building activity (in 2008) although we remain of the view that any sustained recovery is unlikely until the second half of the year."
Activity in the housing sector was stronger in December, up to 59.8 points from 52.5 points, as was commercial property, which was up 2.3 points to 57. However, the volatile apartment sector dropped for the second straight month, to 46.7 from 49.9.
Australian building approvals data for November from the Australian Bureau of Statistics showed a stronger than expected 8.9 per cent rise.
UBS senior economist Adam Carr said the overall result, while better than expected, wasn't strong enough and as a result he said he didn't see any easing during the first half this year of housing market pressures on vacancy rates and rents.
Mr Carr said there was a marked divergence in state-by-state performance in November building approvals, with NSW approvals surging by 66.7 per cent -- largely apartments but house approvals were strong also -- and strong growth in WA and SA. In contrast, approvals fell in Victoria and Queensland, down 10.8 per cent and 5.7 per cent respectively.
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