Sales of new homes rose for a second straight month in February as lower interest rates and government grants enticed buyers, a survey shows.

The Housing Industry Association (HIA) said new home sales rose by 3.9 per cent in February, led by a 4.7 per cent increase in the purchases of detached homes.

HIA chief economist Harley Dale said the project home building market received a boost from low interest rates and the first home owners grant (FHOG).

The Reserve Bank of Australia (RBA) cut the cash rate by 100 basis points to a 45-year low on February 3, for a total of four percentage points in easing by the central bank since September.

In mid-October, the federal government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built homes.

“The number of detached home sales of large volume builders has been trending higher for five months now,” Dr Dale said.

“This is evidence that the tripling of the FHOG is working in generating new home building activity and employment.”

Loans to first home buyers hit a record 26.5 per cent of housing finance approvals in January, Australian Bureau of Statistics data revealed.

Dr Dale said off-the-plan sales of flats and home units fell 3.4 per cent in February as tight credit conditions hampered the interest of investors.

It was the fifth straight month sales of flats declined.

“It is important to consider incentives to boost the supply of investment as well as owner occupier housing stock to ensure the number of private rental dwellings is increased,” he said.

“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.”

Sales of detached homes climbed by 21.7 per cent in Queensland during February, followed by a 11.1 per cent rise in NSW and an increase of 4.2 per cent in Western Australia.

In February, Victoria had a 5.6 per cent fall in new home sales, while South Australia had a decline of 3.9 per cent following a 25 per cent rise the month before.

The HIA’s survey comes ahead of February’s building approvals report from the Australian Bureau of Statistics on Wednesday.

AAP