Prestigious inner city suburb sets new benchmark as Auckland property prices show no signs of slowing.

New Zealand has its first $2 million suburb.

The average home in Auckland's Herne Bay is now worth $2,003,300 according to CoreLogic data released exclusively to the Herald.

The prime central city post code was the nation's first to reach the $1million mark in 2003 but has now set a new benchmark as Auckland's overheated housing market continues to surge. It is the first suburb nationwide to hit $2 million.

Across Auckland, 52 of the city's 213 suburbs are now in the million-dollar club - up from 47 last month and 37 in March.

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Only two suburbs outside Auckland are worth more than $1 million, both in Christchurch. They are Scarborough ($1.09 million) and Kennedys Bush ($1.06 million). Wellington's closest is Seatoun at $971,000 while Queenstown's highest is Jacks Point at $899,000.

CoreLogic senior research analyst Nick Goodall said St Marys Bay was Auckland's second-most expensive suburb at $1.83 million, followed by Remuera ($1.66 million), Stanley Point ($1.55 million) and Epsom ($1.52 million). Prime Minister John Key's home suburb Parnell has fallen out of the top five at just over $1.3 million.

The city's surging prices reflected a continuation of strong demand and a shortage of housing supply, Mr Goodall said.

"You can't get away from the fact that it's high migration, high confidence, low supply and low interest rates - all these things that make it beneficial to purchase property.

"I think for the foreseeable future the factors that are pushing the increases in Auckland aren't going to stop anytime soon."

Despite the dizzying cost of Herne Bay properties, Mr Goodall said the suburb had to be put in an international context. In Sydney it was not uncommon for inner city suburbs to be worth between $2 million and $5million for an average home.

"Two million for a seaside suburb near the centre of the Auckland - that's pretty appealing when you compare it to similar things in Australia. It does show Auckland is becoming more recognised as an international city and that high end is certainly getting driven up by local as well as international purchasers."

Herne Bay is one of the city's oldest suburbs and home to Cremorne St - the country's most exclusive housing enclave where the average home will set you back north of $6 million.

The suburb is dotted with immaculately renovated weatherboard villas with stained glass windows and white picket fences.

It also boasts a collection of high-end boutique designer stores and trendy eateries frequented by a wealthy who's who.

The streets are lined with Audis, Mercedes and four-wheel drives.

Asked who could afford to live in a $2 million suburb, Mr Goodall said it was likely a mix of rich executives and "Dinkys" - double income no kids.

"And you've maybe cashed out of something previously, you've been in for a long time, or you've built up equity elsewhere and you've kept moving up."

Barfoot & Thompson director Peter Thompson said Herne Bay's meteoric rise was a sad reflection of Auckland's limited housing stock and strong buyer demand.

Meanwhile QV figures released this week show the average Auckland home is now worth nearly $830,000 - a 16 per cent year-on-year rise.

An OECD report released yesterday warned that soaring house prices were burdening Kiwi households with debt and putting the nation's financial stability at risk.

Love of 'village feel' keeps owner from cashing up

Tara Patel's family ran the Herne Bay Price Cutter dairy for 30 years. Photo / Jason Oxenham
Tara Patel's family ran the Herne Bay Price Cutter dairy for 30 years. Photo / Jason Oxenham

Tara Patel knows Herne Bay more intimately than most of its well-heeled residents ever will.

The mother of three bought her three-bedroom Wanganui Ave home 40 years ago for $47,000.

"That was a lot because we paid 20 per cent interest, thank you very much."

Her family ran the Herne Bay Price Cutter dairy for 30 years and have run the Herne Bay Post Centre for the last 26.

She knows everyone - a customer in her 80s owns 14 properties - and says she will never leave the swanky suburb where average house values are now more than $2 million apiece.

"I wouldn't know where else to live anyway."

Mrs Patel said most of the suburb's villas were run down half a century ago. She is amazed at what their new owners have done to renovate them.

"There are so many young people now. When we moved in there were a lot of elderly people. There's still a few but a lot have sold to move on to cheaper suburbs - they can't afford the rates."

Although she admits Herne Bay still has a lovely village feel, she can't understand its soaring property values. "They're not realistic prices around here."

Many property owners were trust fund recipients or "mortgaged to the hilt". A couple were self-made millionaires.

Mrs Patel is mortgage-free and her 1906 weatherboard home has a CV of $1.56 million but she has no plans to cash in and buy a palace in the provinces.