An Arrowtown real estate agent has described the housing market as "extreme'' and unlike anything he has experienced in more than 20 years.
Figures released by Quotable Value last week showed Arrowtown had, as of July, hit the $1million milestone of house values, up 20.8 per cent on 12 months ago.
The median for the village has now almost doubled in the five years since the Queenstown Lakes District Council decided to create an urban boundary around the village.
The council voted to adopt the independent commissioners' recommendation on Plan Change 29 in October 2010. QV data shows in the five years since that decision was made, the Arrowtown median had increased 46.4%, from $604,000 in the three months to June of that year.
Richard Newman, of Ray White Real Estate, said the median had dropped slightly below $1 million in the last few weeks, now sitting around $959,000.
A month ago it was $990,000, he said.
The lower median was attributed to three or four sales of Butel Park apartments for between $650,000 and $750,000 "but you can't buy a house for that in Arrowtown''.
"It is crazy. What's holding it up is the supply. There is no supply out here. Because we've got such a small number of sales, you only need one or two and the average sale price is a million bucks," said Newman.
"It's such a small and volatile market, so you've got to be very careful at how you look at those figures but, in saying that, it's been hovering around close to the $950,000 close to $1million for just about a year now.''
Newman said demand, while still high, had dropped slightly. Instead of three or four potential buyers, there were now "one or two''.
Many of those were Auckland or Sydney residents who were investing in holiday homes.
"Because there are so many flights ... now, it's a breeze.
"They're getting bolt-holes ... It's driven by Auckland people, friends of friends [who say] `we bought a house, come and live in Arrowtown, come and buy one, too'.
"It's nice for them to put [their money] here but it's a problem for us; for the local person.
"It is extreme and it's gone on for longer than normal. I've never seen it this high or this bad for housing.''
Newman described the rental property market in Arrowtown as "diabolical'', with "people crying out for houses''.
"I know a couple of houses [being rented for] $1000 a week, and that's just a three-bedroom, maybe two-bathroom home.
"It's just terrible.''
He believed one of the biggest drivers of the prices in Arrowtown had been then council's decision to create a boundary around the village through PC29 - it came into force last April.
That effectively drew a ring around Arrowtown, limiting urban growth to within the existing urban zones.
"If you stop the supply and the demand's there, the price is only going to go up,'' Mr Newman said. "We had a higher sale price than Queenstown, which is ridiculous ... and it's all because we don't have the land.''