May saw the best month for house sales in the past six years, according to monthly property stats released today by the Real Estate Institute.
Median house prices in Auckland, Canterbury and other parts of New Zealand including Westland, Nelson and Marlborough rose to a record last month also.
The median price in Auckland rose to $565,000 from $555,000 in April, the biggest gain of any region. Auckland prices also rose 2 percent to a new record high based on the REINZ Stratified Median Housing Price Index, the Reserve Bank's preferred measure that strips out distortions in the data.
The figures were released as both Housing Minister Nick Smith and Auckland Council appear before the parliament's social services select committee, which is considering a bill that would free up land for housing in New Zealand's biggest city, which currently lags behind demand and has fanned prices.
"There are too few houses coming to market in the Auckland region, creating an imbalance between supply and demand and driving up house prices at both the regional and national level," said REINZ chief executive Helen O'Sullivan. "The low level of new builds is well below trend, making little impact on the available stock of residential properties for sale."
The Reserve Bank is considering limits on high loan-to-value home mortgages among measures to take the heat out of the property market, which it says could pose a significant risk to country's financial stability.
All eyes will be on Reserve Bank Governor Graeme Wheeler tomorrow morning at 9am, when he delivers his quarterly Monetary Policy Statement. This statement may contain further details about the nature and timing of attempts to rein in house prices.
Nationally, house sales rose 7.5 percent in May from a year earlier to 7,714, the highest for that month in six years, while the median house price rose 0.4 percent from April to $392,000, a gain of 6.2 percent from May 2012.
The REINZ Stratified Median Housing Price Index rose 0.7 percent from April to a record, having gained 8.7 percent from a year earlier.
Days to sell rose to 35 in May from 34 in April, but down from 38 in May last year.
The median house price for Canterbury/Westland rose to a record $360,000 in May from $353,000 in April, while Nelson/Marlborough recorded a record median price of $353,625.
ASB Bank economist Jane Turner said that after seasonally adjusting today's REINZ stats, house sale edged lower by 3 per cent in May.
"While house sales are up 7 per cent on year-ago levels, the trend in house sales has been steady over the past 6 months. However, there is evidence that Auckland and Canterbury markets are supply constrained and demand in these area may be stronger than turnover implies," said Turner.
She said it was concerning to see the lift in house prices outside of these regions, where supply constraints were less of an issue.
"The acceleration in house price inflation in these areas indicate it is becoming increasingly appropriate for the Reserve Bank to lift the OCR (official cash rate) from very low levels to ease demand."
Turner said higher interest rates would provide some offset to stronger income growth and increased household confidence.
"However, at the minute the Reserve Bank is reluctant to increase the OCR given the elevated trade-weighted New Zealand dollar and low inflation pressures."
Turner said that recent communications from the Reserve Bank indicated it was strongly considering placing restrictions around growth in high loan-to-value lending.
"While blocking access to credit might choke off demand in some instances, it is unlikely to have much impact on demand for prospective buyers in strong capital positions, particularly while interest rates remain at very low levels."
Turner said she saw the OCR as the most effective tool in reducing housing market pressures and expected the Reserve Bank to lift rates from March next year.