"We are still seeing a lot of people moving down from Auckland and buying property in the Bay of Plenty as they look for more affordable homes out of the Super City market."
"There is also a severe shortage of rental properties available due to high demand outstripping supply and this has led to a dramatic increase in rents across the city."
Tauranga Harcourts franchise owner Max Martin said there would be a strong demand for houses under the $450,000 price bracket from now on.
"We're seeing strong demand at the moment, for sure."
It was first home buyers, Auckland investors and people buying for their retirement driving the market, he said.
The smaller increases in the Western Bay market reflected the slow rural sales, he said, but sales had been increasing in volume in recent months.
The 1.7 per cent rise in the past three months in Tauranga also came as no surprise to 22-year-old home-buyer Katy Carr who moved from Auckland in December last year and began house hunting.
Miss Carr said despite Tauranga homes being more affordable than their Auckland comparisons, the intense competition seemed to be driving the price up.
She started looking in January and had already noticed increases in price and saw houses going off the market within days, or even hours, of being listed.
"I've noticed since I've been looking the prices have gone up so that's why I wanted to find a place as soon as possible because I think as more Aucklanders move down, it will continue to push prices up."
She had started looking in Mount Maunganui but the lack of houses on offer prompted her to look further afield and she was now in the due diligence phase for a property in Bayfair.
However, Eves and Bayleys Real Estate chief executive Ross Stanway said if demand was greater than supply then the figures would have shown more than a 5 per cent increase year on year.
He said the figures reflected a "good, steady, balanced market".
"For some time now these QV figures have come out showing a year on year 5 per cent increase so that appears to be holding."
He said the consistency of the increase showed a balanced market between supply and demand.
"If demand was that much greater than supply we'd see a bigger increase than 5 per cent."
However he said the supply and demand would vary from suburb to suburb which was not reflected in the figures as they averaged out the whole area.
Tauranga Rentals owner Dan Lusby agreed it was the large demand and short supply that kept the prices rising as they were.
People who bought their houses during the 2007 peak would be holding on to their properties until they could sell for a profit, limiting the number of homes on the market, he said.
"We still have a shortage of houses in Tauranga. We need more houses built."
As immigration increased and a growing business industry drew more people to the area the demand for houses would increase and pushing the prices up, he said.
"It's positive for a property owner but a negative if you want to buy or even rent."
