House prices are still going up, new data shows - suggesting the Reserve Bank might be able to lift the official cash rate (OCR) without hurting homeowners too much.
Values nationwide rose 1.8 percent in July, the nationwide median now $922,421.
The fastest growth was recorded in Napier, up 2.6 percent. Strong growth was also recorded in Auckland and Christchurch (both up 2.1 percent).
Christchurch leads the way for the main centres in the past three months, up 8.4 percent in the past quarter, followed by Palmerston North (8.3) Tauranga (7.9), Lower Hutt (7.7), Whanganui (7.3), Wellington (7.1) and Queenstown (7.1).
Across the country, prices are now 24.8 percent higher than they were a year ago. Queenstown is the most expensive region, followed by Auckland (both with a median above $1.3 million).
Drilling down further, the towns where values have gone up the most in the past year are Wairoa - up 53 percent to $365,057, Tararua (up 47.6 percent), Opotiki (43) and Whanganui (40.1)
The overall increase of 1.8 percent is the same as it was in June, but lower than in May (2.2 percent) and April (3.1).
The only city to see an increase in the rate of value growth was Nelson - up 5 percent from 4.8 in June.
"The exceptional rate of growth witnessed following the economic recovery after the pandemic-induced lockdown was not sustainable," said head of research Nick Goodall.
"However with an asset class the size of the residential property market, which now exceeds $1.54 trillion and remains attractive due to still-low interest rates, any slowdown was destined to be gradual."
The Government has sought to dampen demand, particularly from highly leveraged investors. Goodall said it appeared there remains a "a strong pipeline of equity-rich investors, previously unsuccessful first-home buyers and other owner occupiers who remained patient are now taking this opportunity to seize on low interest rates before they lift any further".
With unemployment expected to fall further in Wednesday's upcoming announcement and employers crying out for more staff, there has been upward pressure on wages - helping to push inflation up higher than it has been. The Reserve Bank's (RBNZ) job is to keep it between 1 and 3 percent.
"With the market still growing, albeit at a slower pace, this may give the RBNZ a level of comfort to lift the OCR without major concern of it having too negative an effect on values," said Goodall.
Lifting interest rates will hurt mortgage holders, but is seen by many economists as one of the best ways to bring house price inflation under control.
"In conjunction with expected strong labour market figures due out on Wednesday, including a probable drop in the unemployment rate for Q2 to at least 4.5 percent (from the current figure of 4.7 percent), an OCR increase looks almost certain.
"The RBNZ longer term will probably be cautious of lifting too far too soon, and we expect they will take their time to assess how Q3 plays out before any big movements in spring."
The next monetary policy review announcement - where changes to the OCR are made public - is on August 18.