New home sales surge to a 13-month high

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Sales of new homes climbed for the third consecutive month, reaching levels not seen in more than a year according to a new report.

The latest survey conducted by the Housing Industry Association (HIA) showed new home sales rising by 4.2% during March to its highest level in 13 months. Sales have jumped by more than 20% since December as first homebuyers took advantage of the government grants and lower interest rates.

Buyers snapped up a large proportion of detached dwellings (houses) in NSW, boosting total sales by 15.2%. Victoria rose by 14.6% and while WA recorded a 7.6% increase in detached home sales. Sales of units rose by 4.7% but it's not enough to arrest a drop of 14% in sales over the March quarter.

"The First Home Owners Boost for new dwellings is clearly lifting residential building activity and securing jobs within the Australian economy," HIA chief economist, Harley Dale.

However, Savanth Sebastian, economist with CommSec pointed out that while the lower mortgage rates and the June 30 deadline for first home buyers is likely to boost the demand for property in coming months, worries about job prospects are likely to hold back property prices.

"The rise in home sales is encouraging news for the building sector. But further action by the Federal Government is likely to be necessary to prevent investors staying away, further exacerbating the rental crisis.

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