Low interest rates and a rising population are leading Hawke's Bay's housing market into unknown territory, according to a local real estate agent.

The average asking price of a property in Hawke's Bay has jumped to $430,000 in the past 12 months, according to Trade Me Property.

That was up $40,000 on July last year, and $120,000 since July 2013.

Gary Brooks of Bayleys Napier said historically low interest rates were likely to fuel house price rises for the foreseeable future.


"I can't see it easing at all. I've seen cycles like this before, but I've never seen interest rates at 4 per cent. We're going into uncharted territory," Mr Brooks said.

Major banks were expected to reduce interest rates further after the Reserve Bank lowered the Official Cash Rate to a record low 2 per cent yesterday.

Mr Brooks said a shortage of houses for sale and high domestic and international migration were combining to fuel sharp increases.

"Open homes have 50, 60 70 people through them, with multiple offers. The competition drives up values."

Mr Brooks said people who found it difficult to buy were more often doing the "next best thing" - building - but he said the council must free up more land to satisfy high demand.

"I can't tell you that's exactly the answer to it, but it'd definitely be a big help if they did."

Mr Brooks said he'd seen increasing numbers of buyers from Waikato, Tauranga and Rotorua heading to the Bay with cash in hand after selling homes to Aucklanders.

REINZ's July figures released this week were lower than Trade Me's figures, with the median Napier house selling for $366,000 and Hastings $310,000.

Mr Brooks said many out of towners were also buying houses to rent out.

Nationally, Trade Me asking prices increased 9.7 per cent since July last year, to an average of $591,100. Excluding Auckland, the increase was 6.7 per cent.

House prices have jumped 51 per cent in the past five years, up from $391,200 to $591,000.