A mould-infested, formerly state-owned house on the North Shore is being held up by the international press as an example of how heated Auckland's property market has become.

Global news agency Bloomberg is reporting that 'London house prices have nothing on Auckland' after a two-bedroom home on Devonport's Kerr St sold for just over $1 million when it went to auction in September.

See photos of the house that sparked the debate here.

Despite its mouldy bathroom and sink-less kitchen, Bloomberg said the sale sparked a bidding war and netted its vendor - the Government - double the valuation used for tax purposes.

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"It's like the supermarket before it closes on Christmas Day - everyone thinks they'd better get in or they'll miss out," Carol Wetzell, an agent with Barfoot & Thompson, which sold the 82-old Kerr St home, told Bloomberg.

The article said the average house price in Auckland City - suburbs in the former Auckland City Council territory - had risen 70 per cent to $1.08 million over the past four years, according to CoreLogic figures, compared with a 50 per cent rise to US$678,000 ($1.03 million) in London over the same period.

Auckland house prices are now the second-highest relative to incomes in the developed world, according to Bloomberg.

Independent economist Shamubeel Eaqub told Bloomberg that the market gains had been "just been extraordinary in terms of the scale of the price increases".

"For a young couple to buy a modest home in Auckland, it's 60 per cent of their income on mortgage payments," Eaqub said. "We're going to run out of fools to buy houses - it can only be the landed gentry."

The Bloomberg article also cited a report released last week by sharebroking firm First NZ Capital that warned there was a risk of a "sharp correction" in house prices given the speed at which they had surged in the Auckland region.

Houses in the city may be overvalued by around 57 percent, First NZ economist Chris Green said.