NSW is boosting hopes the economy is "moving into recovery", after home-lending figures released in January showed the state leading the country in a housing turnaround.
Economists said the figures highlighted the Sydney housing market had "bottomed out", allowing more people - including first-home buyers - to join the market.
The outlook was also "looking better" for the flat job market.
The number of home loans approved for owner-occupied housing in NSW rose 5.7 per cent in November, according to the Australian Bureau of Statistics' seasonally adjusted figures. That compared with the national average of 1.3 per cent.
Tasmania recorded a 6.5 per cent jump but NSW had a higher number of approvals, driven by first-home buyers following the Government's doubling of the homeowners grant.
There was still an overall decline in the housing market, which slowed by about 1 per cent in November.
New houses purchased by first-home buyers jumped by almost 10 per cent and the proportion of first-home buyers in the market rose to 23.6 per cent in November, from 19.5 per cent in October, according to the figures.
What’s Ahead?
A new report suggests the average house price in Sydney will increase marginally until an upturn in 2010, but the cost of renting will soar.
Leading economic forecaster BIS Shrapnel says the average Sydney house price will hit $550,000 this month after stabilising in the last financial year, following a decline from 2004 to 2006.
Average house prices are expected to rise to $560,000 by June next year but that is a 17 per cent fall from the March 2004 peak.
The report says escalating rents and easing credit conditions will be the key to the next upturn in house prices, expected towards the end of 2010.
It says interest rates rises are likely to keep a lid on growth until then.
The report predicts Sydney house prices will rise by 18 per cent by 2011, compared to 22 per cent in Brisbane and on the Gold and Sunshine coasts.
Price levels in Newcastle and Wollongong are significantly lower than Sydney, with those markets benefiting from the lack of affordability in Sydney.