Mayor Len Brown's vision of Auckland as a compact city has been dented by a new report which blames proposals to limit sprawl for pushing up house prices.

QV statistics released yesterday showed that Auckland house prices had broken the peaks of the 2007 boom. Commentators had said a lack of housing stock was putting a premium on prices.

The Productivity Commission's inquiry into housing affordability found that concentration of growth in the urban spaces limited the amount of land available for housing. The commission recommended that Auckland Council immediately free up space on the city's fringes and rural areas for housing.

Finance Minister Bill English reiterated the findings, and said the council had acknowledged it needed to take into account the needs of low-income earners.


"The existing policies have tended to push prices up pretty sharply in Auckland, more so than anywhere else, so there's been a bit of progress so far and we would certainly want to continue that discussion."

Plans to focus development within urban limits have been given new emphasis by Mayor Brown, who proposed a modern, compact city built on improved public transport.

The commission's recommendations have stoked fears from some councillors and environmental groups of uncontrolled urban sprawl, which could choke Auckland's infrastructure.

Deputy Mayor Penny Hulse slammed the commission's report as "ideological nonsense" which failed to understand how modern cities developed.

She said the commission had ignored the Auckland Plan's proposal for 160,000 houses outside the urban limit, which would create a city bigger than Hamilton, Dunedin, Hastings and Palmerston North combined.

Ms Hulse said: "There is ample room to redevelop land that gives people the chance to live near to employment, educational or lifestyle opportunities. It is that demand, along with population growth, that is driving the market, not the cost of land at the boundaries."

The Auckland Council originally wanted to squeeze 75 per cent of the city's housing growth in the next three decades within existing urban boundaries. This was softened in the Auckland Plan to between 60 and 70 per cent - about 280,000 dwellings.