A rise in new home construction appears to be gaining traction with new home sales hitting their highest level in over two years.

Sales of new homes increased by 6.4 per cent in September, seasonally adjusted, the strongest monthly growth since April 2012, according to the Housing Industry Association (HIA).

The increase reflected a 4.5 per cent rise in sales of detached houses and a 19.9 per cent boost in multi-unit sales.

Over the September quarter, detached house sales rose 3.7 per cent – and by 25.2 per cent compared to the same period in 2012.

Total new home sales reached their highest level in over two years in September, HIA chief economist Harley Dale said.

“Given the recovery in sales is occurring from a record low and that the upward momentum appeared to be stalling in mid-2013, this September outcome is very positive,” Dr Dale said.

“A strong September result for new home sales needs to gather further steam and clear upward momentum for building approvals and new housing finance needs to occur over the foreseeable future.

“These outcomes would provide confidence that the first round of the new home building recovery seen in 2012/13 can gather legs this financial year.”

CommSec chief economist Craig James said the data was good news for building materials companies and developers.

“While it is encouraging that housing supply is lifting to meet demand, and investors are putting money to work in property markets, those same investors should be heeding the advice of the Reserve Bank Governor to make `sensible assumptions about future returns’,” Mr James said.

“The HIA believes that there is still a shortfall of new housing stock.

“The complication is the shift by Australians to more efficiently use their housing space.

“Not only are Gen Y staying longer at home with their parents or moving out and sharing accommodation with a number of people, but older parents are choosing to live with their children.”