New home sales surge for the second month

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The sales of new homes rose for a second consecutive month in February, according to the Housing Industry Association.

Total new home sales increased by 3.9% over the previous month, while sales of detached homes increased by 4.7% and were up 8% over the three months to February.

"This is evidence that the tripling of the FHOG (First Home Owner Grant) is working in generating home-building activity," said Harvey Dale, HIA's chief economist.

Dale said that even if the boost to the grant ends on 30 June this year as planned, he doesn't foresee a major shock to the building industry. Some property experts have warned demand could fall off once the boost goes.

"I think that concern is probably a little overdone," said Dale. "In so far as the grant is only the first step to constructing a new home on the ground, even if it ends on June 30, we'll still see the stimulus working well over half of the year, and public and community construction is being ramped up by the government as well."

Victoria has shown the most strength in the construction of new homes this year, he says, although new home sales in the state dropped in February by 5.6%, following a 24% lift over the previous two months.

In New South Wales and Victoria, where activity has been slow, the latest figures showed the greatest increases. New home sales in Queensland jumped 21.7%, while they were up 11.1% in New South Wales.

"Those two states are where the biggest shortages are, and also where the housing activity has been the weakest over the last six months," said Dale.

He added that the housing demand along the eastern seaboard, as well as parts of Western Australia, would continue to outpace supply for at least a couple of years.

"If you aggregate [supply and demand] across those four - pretty large - housing markets, there's a long way to go to bridge the gap," he said.

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