Sales of new homes hit a 13-month high in May, according to the Housing Industry Association’s New Home Sales report.

The report, which is compiled by surveying the largest volume builders in Australia, says new home sales are up by 6.9% during the month. HIA Senior Economist, Maurice Tapang, says the figures show demand remains high.New South Wales and Victoria have increased sales volumes, following two years of weakness. “This increase is the first suggestion of an improvement in market conditions in these states,” Tapang says.

Sales in Queensland remain stable, according to Tapang, following on from record sales levels in the previous month and a strong upward trend in the past 12 months.

Sales fell in South Australia and Western Australia during May but Tapang says levels remain “robust”. He says even with a recovery in market confidence, there remains a shortage of housing in Australia due to the regulatory barriers to increasing supply.