The number of new homes sold in July increased by 0.1 per cent, following a 0.5 per cent rise in June, according to the HIA.

HIA chief economist, Harley Dale, says that new home sales had stabilised in mid-2009 after a strong rise provided by the First Home Owner Boost.

"Housing finance figures point to an emerging recovery in trade-up buyer and investment numbers, but looking beyond first time buyer related activity we're not yet at a point where we can talk of a broad based recovery in private new home demand," he says.

Dale also attributes July's moderate lift to the "bogged down" approval process and a slow start to the Social Housing Initiative.

Detached new home sales results varied considerably across the five mainland states in July. They increased by 9.8 per cent in NSW and 10.2 per cent in Queensland but fell by 4.4 per cent in Victoria, 11.6 per cent in South Australia and 3.1 per cent in Western Australia.