New home sales in Australia rose 3.9% in February, registering the second consecutive month of increase, the latest report from the Housing Industry Association said Monday.

During the month, detached home sales climbed 5%, with the number of sales of large volume builders rising for the fifth consecutive month.

The HIA's chief economist, Harley Dale said The project home building market is gaining much-needed stimulus from low variable mortgage rates and from the boost to the First Home Owners Grant.

Moreover, the HIA noted that the tripling of the First home Owners Grant was helping to generate activity levels and increase employment in the building sector.

Meanwhile, pre-contract sales of apartments and home units declined 3.4% in February, marking the fifth consecutive month of fall as residential investors remained cautious and the credit crunch continued to have a bearing on activity levels.

Dale said incentives to boost the supply of investment as well as the stock of owner occupied houses would ensure that the number of private dwelling for renting is increased.

Rental market conditions are extremely tight and the shortage of housing stock is placing ever-increasing pressure on those households within the private rental market, Dale noted.

In February, detached new home sales increased by 21.7% in Queensland and were up by 11.1% in New South Wales and by 4.2% in Western Australia. However, sales fell moderately by 5.6% in Victoria, following a 24 per cent lift over the previous two months. Sales fell by 3.9% in South Australia after a jump of 25% in January.

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