The construction sector is poised to witness a recovery this year, but uncertainties due to the coronavirus outbreak might dampen this outlook, said an expert.

Angela Lillicrap, economist at the Housing Industry Association, said a significant improvement in the housing market sentiment was observed during the second half of 2019.

"Leading indicators were suggesting that demand for new homes had stabilised and would return to growth going into 2020. This is confirmed by the number of new home starts picking up slightly in the December 2019 quarter," she said.

Figures from the Australian Bureau of Statistics show that new home construction increased by 1.2% over the quarter, bringing the total number of housing starts for the year to 174,246. Gains were recorded in both detached dwellings and multi-units, with the latter reporting a stronger growth at 2.9%.

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Despite the improvement recorded over the second half of the year, the total number of starts for 2019 was still 22.6% lower than in 2018.

"Victoria reported the weakest quarter for multi-unit commencements since 2009. This result follows a sustained boom in the state's multi-unit construction. It represents a return to a level of construction closer to what was typical prior to those boom years," Lillicrap said.

This growth in housing starts was just one of the early indicators pointing to a solid 2020. Separate ABS figures show that investors were ramping up their participation in the market before the COVID-19 outbreak started taking its toll on the economy and the property sector.

Investor lending grew by 3.4% in the three months to February. On an annual basis, the investor segment recorded a 6.3% gain in financing.

"These results, along with other leading indicators such as new-home sales and building approvals data, continue to confirm that the housing market reached a turning point mid-way through 2019," Lillicrap said.