A new $335,000 record national median house price sparked projections from senior banking economists yesterday that interest rates would climb even higher soon.
Darren Gibbs, Deutsche Bank's chief economist, said the latest real estate data showed an incredibly strong house sales market and he predicted the Reserve Bank would tighten monetary control in the next few months.
The Real Estate Institute yesterday released its sales figures for last month showing prices had risen from a national median of $327,000 in January. Auckland house prices were up in every area except Papakura and Franklin where a drop in sales volumes was blamed for a decrease.
The rising prices are good news for the owners of the country's 1.4 million houses because they all got a little richer - on paper at least.
Institute vice-president Mike Elford said people should not ignore that point, adding that the latest figures had exceeded expectations. "The market in February was even stronger than first thought and is not the news the Reserve Bank was wanting to hear, but it's great for homeowners in terms of growing the equity in their primary savings vehicle," Mr Elford said.
Last week's interest rate rise came too late to deter people and would ultimately have little effect. Volumes were well up, from 7566 sales in the traditionally slow January to 9357 sales last month. It took 38 days on average to sell in January but just 32 days last month.
Mr Gibbs said houses were selling at the fastest pace since 2005.
"The housing market was strong in February. It's little wonder that the median price rose 2.4 per cent month-on-month to a new record high and is now up 13.6 per cent year on year."
Shamubeel Eaqub, Goldman Sachs JBWere's investment research director, said: "We remain of the view that the housing market needs to cool, but the ease of access to relatively cheap credit and home buyer confidence means the tipping point is not clearly apparent."
The Reserve Bank had already signalled its desire to rein in the housing market. In the next few months changing tax rules on investment properties and introducing capital adequacy ratios of banks may be introduced.
"We believe another [rate] increase on April 26 is most likely, with a small risk of another hike beyond that."
But Nick Tuffley, ASB's chief economist, is not picking an interest rate rise next month, saying the Reserve Bank will wait a little longer before it moves.
Quotable Value said on Monday that housing prices rose 9.3 per cent in the year to February compared with the year before. That pushed the average sale price for a property to $363,017.