Auckland's spring housing growth

House prices stayed flat nationally last month, but Auckland hit a major spring resurgence, leaving one economist saying the Reserve Bank would be extremely unhappy with the ever-flourishing residential market.

Real Estate Institute figures showed an unchanged national median of $290,000 but a rise of more than $8000 in Auckland metropolitan area prices from $375,000 to $383,250.

Westpac chief economist Brendan O'Donovan said a rise in the official cash rate this month was "virtually a done deal" and would probably be followed by another in December.

"The Reserve Bank won't like the figures," he said, referring to governor Alan Bollard's Friday statement that the country was spending too much and rising house prices could not continue.

Mr O'Donovan noted strong price increases in many provinces, and calculated house sale volumes were up 6 per cent between August and last month which he said was a large jump in turnover. Prices were up 12.7 per cent in Auckland since September last year but 23 per cent in the provinces, he calculated.

"This is a very strong result," he said, adding the figures bedded down spectacular rises throughout the year, particularly the July jump.

"There appears to be a big resurgence in Auckland.

"It's impossible to say how long this will persist because the market is being driven by sentiment rather than fundamentals."

Rising interest rates, slowing migration, additional new housing supply, fewer English language students, the exchange rate and extremely low rental yields were some of the factors which had been expected to force prices down.

But confidence in the market was holding, leading to the stronger result in the latest figures, he said.

Last month institute president Howard Morley predicted sales would soon break the $300,000 national median barrier.

But officials were yesterday attributing the flatter national median to an increasing number of lower-priced sales.

Institute vice-president Murray Cleland said sales had sped up, an indication of a strong market. Only an increase in sales in the under-$400,000 category had pushed down the median.

Houses were taking an average 30 days to sell for most of this year but last month it was just 27 days.

BNZ chief economist Tony Alexander said the flatter numbers were an indication of a change but there would be no housing crash.

"The market is still strong but there's no doubt that it will ease off and the risk is that quite a few negative factors could come together."

Rising inflation might drive more people to consider buying real estate as an inflation-proof asset class, he predicted.

He hit back at last week's institute comments critical of economists and questioned the institute's bullish predictions.

"If agents are confident buyers will continue to come forward in droves, we would not have seen the criticism they made last week.

"We've reached the stage of the housing cycle where real estate agents don't want as much commentary on the down side of the market as we are making."