Raj Aryan

New Zealand house prices hit a new record high last month, ignoring central bank attempts to take some heat out of the market, according to the Real Estate Institute of New Zealand (REINZ).

On the back of rising house prices in Auckland, the national median price rose 2.5 per cent in March to $343,500, to be 13.7 per cent above a year ago.

The median price in Auckland rose 3 per cent for the month, to $443,000.

National sales rose 17.4 per cent from February to 10,989 houses sold, while days to sell fell to 27 days from 32 days.

Last month, the Reserve Bank raised its benchmark Official Cash Rate (OCR) by 25 basis points to 7.50 per cent, to help put the brakes on inflationary pressures which have been driven in part by surging house prices.

Retail banks, which have kept mortgage rates low because of stiff competition, have finally taken heed. Two-year fixed mortgage rates have risen around 50 basis points since the Reserve Bank's hike, to an average 8.79 per cent.

"Most mortgages are on a fixed rate so many people take the view that whatever pain they will eventually endure from rising mortgage interest rates, is at least postponed until their fixed rate mortgages roll over," Mr Cleland said.

"As a savings medium, the residential property market is currently hard to beat and as much as the popular focus is on the cost of a mortgage, the fact is that homeowners have enjoyed a significant increase in the equity in their homes in recent times, which is feeding through into our current economic prosperity."

Economists have warned that house price growth is not likely to continue at current rates, although there has been no sign of a decline.

A slowdown in apartment construction helped boost Auckland City's median price, which had been influenced by the large volume of cheaper apartment sales, Mr Cleland said.

Five of the 12 regions saw median prices decline, six rose and one was steady.

The regions with a falling median price were Northland, down 1.3 per cent to $306,000; Hawke's Bay (down 1.5 per cent to $268,000), Taranaki (down 1.7 per cent to $260,500); Central Otago Lakes (down 5.6 per cent to $416,000); and Southland (down 4.8 per cent to $157,000).

Wellington's median price rose 1.2 per cent to $375,000.

Against March 2006, Manawatu/Wanganui led with price growth of 27.8 per cent, followed by Southland with 22.6 per cent.