A new report has signalled some early success achieved by the First Home Owner Grant boost announced in mid-October. National sales of new houses and units jumped 4.5% in October, following a steep drop of 10.4% in the September quarter according to the Housing Industry Association.

Sales in Queensland surged by 24.9% to their highest level in 2008. Victoria also staged a stunning improvement in the same month with sales climbing by 20.3%. South Australia notched up a decent 17% increase in sales, but both NSW and WA recorded sharp declines.

The result was one of the first concrete signs that the tripling of the First Home Owner Grant for new homes was working, seeing the grant go from $7,000 to $21,000 in Australia. NSW boosted it even higher, to $24,000.

HIA chief economist Harley Dale said the report showed the first increase in new home sales since June. It was also the largest increase since January.

"Both new home sales and building approvals fell sharply over the first nine months of 2008," said Dale. "It will be a long road back, but it is hoped that an improvement in new home sales in October could mark the beginning of a stabilisation followed by improvement in leading housing indicators over 2009."

Dale said the caveat was that any recovery in the new home market will still be constrained by a "lack of readily available land, planning delays, and the excessive cost of state and local government taxation on new homes".

The HIA survey is compiled monthly from a sample of the largest 100 residential builders in Australia, and is the first indicator of new home building activity released each month.