The average house value in Tauranga has climbed above the $700,000 mark — an increase of more than $200,000 since late 2015.

Tauranga is New Zealand's third most expensive place to buy a house, behind Auckland and Queenstown, according to the new data.

The city's house values rose by 3.8 per cent year on year and 0.8 per cent over the past three months.

The latest monthly QV House Price Index has the average house value in Tauranga as $704,183.

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Tauranga Mayor Greg Brownless said it was "ridiculous" and had been for a while.

"I hope that it corrects a little to enable people to get into a first house, that is just way beyond most people's ability," he said.

Asked if he thought it would affect the number of people moving to Tauranga, Brownless said: "At the moment most people would say, I think, that we could do with a few less people coming until we can get our transport and roading infrastructure right."

He said while the city did not want growth to stop, he did not think it would be a problem if it slowed down a bit.

Tauranga Harcourts managing director Simon Martin said there was less demand for low price-bracket houses in Tauranga and that was affecting the average value.

Investors were holding back from buying and first home buyers were cautious as well, he said.

"The problem there is that you take out that part of the market and it pushes the [average house value] up."

Simon Anderson, chief executive of Realty Group which operates Eves and Bayleys, agreed and said there was "still really strong demand" in the top end of the market.

To his knowledge, the average house value had never gone above $700,000 in Tauranga.

"Ranking behind Auckland and Queenstown doesn't surprise me given the popularity of the Tauranga region."

Anderson said the sale of high-value properties along Marine Parade and Ocean Beach Rd in Mount Maunganui, as well as lifestyle blocks selling for "big numbers" in Bethlehem, would be lifting the average house value really quickly.

Anton Jones, of First National Realty, had also never seen the average house value this high.

"It was inevitable at some point. Tauranga has had a great period of a few years where it has had a heap of growth, a lot of people coming in from Auckland and Wellington and Christchurch and stuff like that."

He said the demand and popularity of Tauranga had increased significantly and because of that, prices and values had also gone up.

"To me, it hit a tipping point a couple of years ago and that's why we see the traffic as it is, because there's so many more people," Jones said.

"It's a very popular place for young families and lifestylers … it's just been good times for Tauranga and the growth of Tauranga in general and hopefully they can catch up with the infrastructure side of things."

Priority One projects manager Annie Hill said increasing house prices in Tauranga was "a bit of a two-edged sword, as they are being driven by unprecedented economic growth".

She said last year Tauranga topped the country for GDP growth at 6.6 per cent, and topped New Zealand cities for job and business growth.

Priority One was not seeing any slowdown in people wanting to move to the city and region to take advantage of the lifestyle and work opportunities.

"We are currently working with around 650 people who are actively seeking work here and are approached by about 40 new people each month. This demand has been consistent over the last two years and doesn't seem to be abating."

However, a key issue for Tauranga was the average salary or wage, Hill said.

"What we need to do is attract more knowledge-intensive businesses which pay higher salaries, which will go towards making houses more affordable."

Meanwhile, Western Bay of Plenty house values rose by 6.8 per cent year on year and 2.2 per cent over the past three months, the latest QV data showed. The average house value is now $630,703.