Australia's new homes market has suffered a setback on its mooted road to recovery, with sales falling for the first time in four months.

New home sales slid 5.3 per cent nationally in February, driven by sharp falls in Victoria and South Australia, according to the Housing Industry Association.

New home sales in February at the lowest annual level in 16 years. Credit:Brendan Esposito

The New Home Sales report, which is based on a survey of the country's largest volume builders, also found that unit sales were down 11 per cent compared to 4 per cent for detached homes.

“The broadly based decline in activity during February is a reminder of how delicate the nascent recovery in the housing industry really is," HIA economist Shane Garrett said.