Property prices in Auckland's less-favoured suburbs are catching up with the rest of the region as home-buyers shift their focus in a bid to get on the property ladder.
Experts say the city is seeing a "spill-over effect" and the loan-to-value ratio caps introduced last year are driving demand for homes in suburbs not traditionally sought-after.
QV figures released yesterday showed the biggest rises were in areas such as Papakura and Manukau.
"When the LVR caps came on, it was pretty clear that people who still wanted to buy houses and didn't have large deposits would have to go to suburbs where the properties were favourably priced," said NZ Institute for Economic Research principal economist Shamubeel Eaqub.
Mr Eaqub said Auckland properties were among the most expensive in the world, and when house prices rose in favoured suburbs it would spill over to further-away suburbs.
The rise in property prices was also being driven by strong economic growth in Auckland and people moving to take advantage of low interest rates before they went up.
Values in Papakura have risen the most in the past three months, with a 4.8 per cent increase.
Franklin and Manukau were close behind on 4.6 per cent.
Waitakere was leading the annual increase with values up 19.2 per cent in a year, and Manukau City the second-best performer with a 16.1 per cent increase.
The former Auckland City area had a rise of only 1.6 per cent in the past three months, but values in the central suburbs are still 31.9 per cent above the 2007 peak, which was one of the largest increases in the country.
"There appears to be an element of 'catch up' in these movements as most other parts of Auckland have moved ahead strongly over the past year," the QV report said.
The Reserve Bank introduced loan-to-value mortgage lending restrictions, requiring most home-loan borrowers to have a 20 per cent deposit, on October 1 because of concern that rocketing house prices in Auckland and Christchurch could cause financial instability.
Mr Eaqub said it was still too early to say if the LVR restrictions would achieve the desired effects.
"With rising interest rates and restrictions on loans, there is a real risk that house prices could stall, and if there is a risk to the economy then house prices could fall," he said.
The report also said there were signs the rate of increase in property prices in the rest of the region was slowing.
QV valuer Bruce Wiggins said land values remained high, but there were fewer auctions and more properties were being sold by negotiation.
Many auctions were attracting no bids or bids below the seller's reserve, contributing to a reduction in the number of sales.
Prices were also pushed down when properties were sold by negotiation, because buyers could undertake more due diligence and bargain when negotiating on price.
"There is limited stock on the market, and real estate agents are having to work hard to sell properties," Mr Wiggins said.
"Although first-home buyers have had their wings clipped with the LVR cap, there is still activity and plenty of other buyers to fill the gap."
Realtor Sue Douglas, who is opening a new Ray White office in Takanini, said the area was "probably the fastest growing area in New Zealand ... after Christchurch".
"The top of the range suburbs are probably getting out of reach a little bit, and we've still got very affordable housing out here."
QV.co.nz research director Jonno Ingerson said national house values rose 2.2 per cent over the past three months.
"This means they are now 12.8 per cent above the previous market peak of late 2007. When adjusted for inflation, the nationwide annual increase drops slightly to 7.9 per cent and values remain below the 2007 peak by 2.8 per cent," he said.
The Reserve Bank is expected to start increasing interest rates from next month to cool the economy as inflation accelerates.
"Property value growth has slowed in the first month of the year," Mr Ingerson said in the report.
"While this is the first month values appear to have slowed the timing does align to the LVR speed limits.
"The predicted increase in mortgage interest rates is likely to also slow values further," he said.
"This may already be affecting buyer confidence and contributing to the slowing we are seeing."
Values in Auckland increased at a 14.5 per cent annual pace in January and Christchurch values rose 12 per cent, compared with an 11.7 per cent gain for main urban areas.
Nationwide prices were 12.8 per cent above the previous peak of 2007.
Auckland property price rise
19.2% Waitakere (year on year)
16.1% Manukau City
Best performing suburbs(past three months)
4.6% Franklin and Manukau Central
1.6% old Auckland City