A steep drop in finance to housing investors and a fall in loans to owner-occupiers indicate the housing market is far from health.

The Bureau of Statistics figures show the value of new loans to housing investors fell 2.7 per cent in July to $6.67 billion.

The value of loans to owner-occupiers was down 1.4 per cent to $13.4 billion, while the number of loans to this group was down 1 per cent.

One positive bit of news for the housing market was the gradual return of first home buyers, who made up 19.2 per cent of new owner-occupied home loans in July, up from 18.5 per cent the month before.

"First home buyers are coming back to the market - although the profile has been distorted by changes to incentives," Westpac's economists observed in a note on the figures.

"For the month, finance to first home buyers rose 2.4 per cent, to be up 19 per cent on a year ago. Further gains are to be expected, as first home buyers respond to improved housing affordability."

Reflecting a decline in home values, and possibly also increased buyer caution about taking out too much debt, the average loan size fell $1,100 for owner-occupiers in generally, with a $600 fall in the first home buyer segment.

Much of the decline in loans was due to a drop-off in refinancing (down 2.4 per cent), however loans were still down 0.3 per cent excluding refinancing.