The number of new homes being built and sold continues to increase despite rising costs of construction and building industry turmoil.

The latest HIA New Home Sales report shows new home sales increased by 3.9% in March compared with the previous month.

Over the year the number of new home starts increased by 30.5%.

The report says that, despite a difficult start to the year, with a shortage of tradies due to Covid illness and materials shortages, new home sales continue to be strong. In fact it is the second strongest quarter since 2016.

HIA Economist Tom Devitt says demand is driven by a shortage of homes and an extremely tight rental market.

In the past quarter, New South Wales sales increased 78% compared with at the same time in 2019, before the pandemic. Sales in Queensland increased 33% during the same period, Victoria 19%, Western Australia 15%.

South Australia was the only state to experience a decline.