Home buyers continued to drive the housing market over the first quarter of the year, with new home sales reporting a spike, according to the latest report from the Housing Industry Association (HIA).

Over the quarter, new home sales increased by 39.4%. This was mainly driven by the HomeBuilder scheme, said Angela Lillicrap, economist at the HIA.

"HomeBuilder, combined with low interest rates, changing population dynamics and improving market confidence, led to strong sales through to the end of 2020," she said.

New home sales reached a record high in December as buyers rushed to finalise their contracts to build a new home before the original deadline of the $25,000 grant. The scheme was extended until April this year. However, the grant was lowered to $15,000.

"This same effect can be seen in March as households rushed to get access to the $15,000 grant," Lillicrap said. "HomeBuilder has brought forward demand for new homes. As a consequence, sales over the coming months are expected to cool from recent highs."

The robust demand for new homes is expected to support building activity in the next coming months and into next year. This, in turn, will provide jobs and support the broader economy, Lillicrap said.

“Demographic shifts in population towards regional areas will continue to drive demand for new detached homes. Strong house price growth recently has also sparked FOMO in buyers, which will also support the industry,” she said.