Australia's housing market witnessed a second consecutive month of growth in new home sales in September, according to the latest figures from the Housing Industry Association (HIA).

Sales of new homes clocked a 5.7% monthly gain, hitting the level seen during the latter half of 2018.

"The improvement in sales is a welcome reprieve from the steady decline that emerged in late 2018. It remains too soon to confirm that the bottom of the cycle has passed, but this result does highlight there is unlikely to be further material falls in new home sales," HIA said.

Despite this monthly gain, new home sales remained down on a quarterly basis — 1.5% lower compared to the June 2019 quarter and 6.3% lower than the September 2018 quarter.

Also read: Building approvals, new home sales still weak

Turnovers for new homes increased for the month in all states except New South Wales, where sales declined by 12.1%. South Australia registered the strongest showing at 18%, followed by Western Australia's 13.6% gain and Victoria's 11% improvement.

However, these monthly gains were not able to offset weaker results in the previous months, resulting in weak quarterly results. Only Queensland was able to experience a significant quarterly growth at 6.9%.

Sales growth drivers

HIA said house prices started shooting up again, which could indicate an improvement in market confidence. Several factors, such as the recent rate cuts and easing of loan serviceability requirements, will likely encourage activity in the market amongst investors and first-home buyers.

"These cuts, along with the easing of APRA's loan serviceability requirements, have started to have a flow-on effect to housing finance. Investors have started trickling back into the market, and first home buyers have the greatest share of since 2012," HIA said.

The upcoming implementation of the First Home Loan Deposit Scheme is also expected to play a part in improving the overall housing market.

"There is likely to be an increase in first home buyer activity, which will help to sustain the recent improvements in new home sales," the report said.