House prices at 10-year high

The sudden house price surge has left economists shaking their heads. Photo / Herald on Sunday

Auckland, Wellington and Christchurch led the housing recovery that sparked a record national price.

Real Estate Institute sale figures revealed that sales last month had pushed the national median to $355,000, which president Peter McDonald said set a record for the past 10 years.

"For the first time we are over the peak of prices in 2007 which is a very reassuring milestone," he said.

Prices rose in seven out of 12 regions and it took only 31 days to sell, down on 33 days in September and 47 days this time last year. Volumes are fluctuating: 4469 houses were sold last October, 6464 in September and 6091 last month.

The sudden price surge has left economists shaking their heads.

NZIER principal economist Shamubeel Eaqub said New Zealand could not afford another credit-fuelled housing boom because it would damage the dollar. "The recession was an opportunity to purge many of the imbalances accumulated in the economy over the past decade, but this has not happened.

"If this housing juggernaut continues, there is a very real of threat the economy will experience another - perhaps more severe - recession," he said.

House prices were still very high compared to income, interest rates and rents. Prices were rising because of a shortage of listings. Low interest rates had made houses more affordable and rising net migration had added to the demand. In the short term these supportive factors were likely to continue, Mr Eaqub said.

ASB economist Jane Turner said the latest figures were very strong.

"The housing market remains tight with low supply continuing to put pressure on house prices. House prices increased 3.3 per cent over the three months to October, which is an annualised rate of 13.1 per cent," she said. "The increase in house prices was broad based, with firm increases in all regions as well as section prices. Nonetheless, the pressure is more intense in the main centres, with Wellington leading the rise with house prices up 9.3 per cent on year-ago levels followed by Auckland, up 6.1 per cent, and Christchurch, up 4.3 per cent."

Westpac research economist Dominick Stephens warned this week of a longer-term slump saying the market was hot right now but it would not last.

But Mr McDonald predicted the good times would not only last but get better.

"I believe the market will firm even further with the better economic news we're hearing more and more frequently."

To check prices in your area, visit www.reinz.co.nz, click market trends, view median graphs and choose your district and zone.