Rising prices in Queenstown Lakes have also meant rising prices in Cromwell and Alexandra, according to Highland Real Estate-Harcourts managing director Kelvin Collins, of Queenstown.
QV data released yesterday showed Queenstown Lakes average house prices rose 27.2% to $930,154 in the year ended August and Mr Collins said the market continued to rise. In the past three months, average house prices had risen by 6.3%, stronger than the Auckland quarterly rise of 6.1%.
Queenstown Lakes average home prices are now up 35.3% since the 2007 market peak and Central Otago prices are nearly 25% higher.
He predicted it would be another 18 months before the stressed market would start to show signs of easing prices, when Jacks Point sections came to the market.
Until then, he would not be surprised to see the average house price slip above $1million.
There were more sales at the higher-than-$1 million mark than below $700,000 in Queenstown Lakes, he said. People in the lower price bracket could not afford to sell and buy a more expensive house, so they were staying put.
As Queenstown Lakes houses rose in price, people were being forced out to Cromwell, where instead of paying $800,000 for a house, they could buy a family home for about $500,000. Cromwell people were moving to Alexandra and buying a home for $350,000, with people being more prepared to commute to their jobs from their more affordable houses.
Central Otago average house prices rose 19.4% to $395,861.
In Queenstown Lakes, no-one was building houses at the cheaper end of the market, Mr Collins said.
A house which could be built in Mosgiel for about $600,000 was costing up to $900,000 in Queenstown Lakes.
The soaring population growth was also putting pressure on house prices. Queenstown Airport's staff numbers rose last year from 350 people to 500, adding 150 people to those already wanting houses.
The retail complex at Frankton Flat employed about 1000 people. People were paying whatever they could afford to get into a house, he said.
Asked who was buying the houses at the top of the market, Mr Collins said tradespeople, those in the construction industry and middle managers.
People in the service industries could not afford the houses but most of them were happy to flat for about six months to a year, have a good time and move on. But the pressure on the housing market had meant rentals rising 20% in the past year.
Queenstown Lakes had not yet had the second home or lifestyle home surge in buying, which probably was helping keep prices down, Mr Collins said.
But as people continued to do well around New Zealand and overseas, they would still want to come to Queenstown. They would have the money to pay premium prices for houses, meaning more people being pushed out to buying houses in Cromwell and Alexandra.
Low interest rates were the new normal and home prices had adjusted to a new level of affordability, he said.
People were trying to buy better quality houses instead of buying something needing $5000 a year of maintenance. The $5000 was going towards higher mortgage repayments, Mr Collins said.
The Auckland house price market increased 15.9% year-on-year and 6.1% in the past three months, QV data released yesterday said.
Auckland values were now 85.5% higher than the previous peak of 2007.
QV national spokeswoman Andrea Rush said she could confirm the QV house price index average value for the Auckland region had now topped $1 million following a strong quarter.
''There was a strong surge of activity in June and July. However, it now appears the new loan-to-value restrictions for investors adopted by banks towards the end of July have started to have an impact in the housing markets in Auckland, Tauranga and Hamilton during August.''
In recent weeks, there had been a fall in market valuation requests, auction clearance rates, open home attendees and loan applications in those centres, she said.
