Auckland house prices were up $125,950 on last year - or $345 a day - according to sales data out from the Real Estate Institute.

The city's median sale price rose from $614,050 last August to $740,000 last month and prices were up $5000 since July.

Colleen Milne, REINZ chief executive, said the presence of Auckland buyers in other regions was becoming more noticeable with a surge in Auckland investors buying in Dunedin and continued strong demand for properties in the Waikato and Bay of Plenty from Auckland buyers.

Nationally, 7766 homes were sold last month, up 41.7 per cent annually but down 4.4 per cent on the previous month of July. The national median price rose $45,000 annually to $465,000.

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The figures from REINZ come as the Reserve Bank cut official interest rates to 2.75 per cent, and banks followed suit, cutting their floating mortgage rates.

Most economists expect the Reserve to now retain an easing bias, with some tipping the rate to drop to 2 per cent by early next year.

Banks cuts mortgage rates

ANZ said in response it would lower interest rates on its floating and flexible home loans, also by 0.25 per cent - bringing its floating home loans rates down to 5.99 per cent and flexible home loans rates down to 6.1 per cent.

ANZ's new rates for new ANZ Floating Rate Home Loan customers would take effect from Monday, September 14 and for all existing Floating Rate and all Flexible Home Loan customers from Monday, September 28.

Westpac lowered its floating mortgage rate to 6 percent, which it said reflected to "competitive" home loan market.

ASB Bank matched the 4.35 per cent special one-year rate the BNZ unveiled last week. It is the lowest home loan rate New Zealand has seen since the 1960s.

It announced later today that it has lowered its variable home loan and Orbit home loan rates by 0.25per cent from 6.25 per cent p.a. to 6 per cent p.a.

These changes are effective Wednesday, September 16 for new customers and Friday, September 25 for existing customers.

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Labour's finance spokesman Grant Robertson said the decision to cut the OCR - despite the "out-of-control" Auckland housing market - showed the Reserve Bank was "doing all the heavy lifting".

"Graeme Wheeler knows the economy is drifting. That's why he's cutting the OCR, despite knowing that risks adding to Auckland's out-of-control housing market, which he describes as worrying."

Robertson said Finance Minister Bill English was ignoring the warning signs, while others such as the Reserve Bank had turned to Plan B.

"Graeme Wheeler isn't a lone voice on this. Bank economists are ringing alarm bells and the Treasury has been sending briefing notes warning the Finance Minister the downside Budget scenario on the economy is turning into reality.

"Plunging dairy prices, exports falling, regional economies already going into recession and a housing market that threatens banking stability are big issues that are happening right now...it's for the Finance Minister to deal with them."

Wheeler optimistic about Auckland market

Wheeler said this morning that strong new Auckland residential building consent data had given the Reserve Bank optimism about Auckland's stretched housing market.

He cited the rising consent numbers as a bright spot in the Auckland housing sector when he gave his post-OCR media briefing in Wellington.

"The good news is that [Auckland] residential permits are running at around 8500 [annually].

"Now that's quite a step-up, about a 20 per cent step-up up over the last year and it's the highest rate - largest number - of permits for about a decade so that's promising," he said this morning.

"What's required to get on top of the Auckland housing market is to address the supply shortages and that's why these residential permit numbers are so important, to see what the trend is there."

See Video - Business editor Liam Dann and senior journalist Jamie Gray on the implications of today's Reserve Bank move:

Business Editor Liam Dann and Herald senior journalist Jamie Gray on the implications of today's Reserve Bank decision to cut interest rates.

Latest Statistics NZ data also showed 1116 consents issued in Auckland in July alone, up 267 consents in a month.

Wheeler said Auckland demand for new housing was extremely strong.

"I think the existing housing shortage - according to some of the council figures - is somewhere between 15,000 and 25,000 houses and the Auckland Council said they need basically about 10,000 houses a year over the next three decades.

"Permits are currently running at 8500. Part of the challenge is that migration flows are very strong," Wheeler said, citing 55,000 annual arrivals and about half of those people were coming to Auckland and the occupancy rate is about three per house.

"So that means - just dealing with the migration flows - you need about another 8000 houses a year or more, just to deal with the migration.

"What's worrying is if you look at the house price to income ratio in Auckland, it's around nine.

"For the rest of the country, it's four and a half. A ratio of nine puts Auckland house prices in a grouping of cities which are probably the most expensive cities in the world.

"Secondly, if you look at investors' expectations for Auckland, there was a survey by ANZ late last year which indicated that over the next five years, investors were expecting house prices to rise by about 12 per cent a year, so cumulatively about a 75 per cent increase.

"House prices in Auckland are increasing rapidly and becoming more unsustainable. Residential construction is increasing in Auckland but it take some time to correct the imbalances," Wheeler said.

He was then asked when the market might turn, given lower sales price data out lately.

"Little bit early to say whether it's cooling down. What's required to get on top of the Auckland housing market is to address the supply shortages and that's why these residential permit numbers are so important, to see what the trend has been.

"We've always said that macro prudential policy can really help to try to try and slow the rate of increase but it can't solve the Auckland housing problem, not by any means."

See the Real Estate Institute's August stats here: