Southern Dunedin real estate prices have surged according to the latest Quotable Value New Zealand figures, recording the highest percentage increase in the country.
December figures showed southern city home values up by 8.7%, to an average sale price for December of $264,623.
The southern area extends from Waverley to Green Island, and includes St Clair and St Kilda.
The trend was yesterday confirmed by real estate agents working in the area, but while there appears to be something of a windfall for sellers, the situation is expected to be short-lived.
Nationally, the December residential price movement index released by Quotable Value showed house values rose 2.8% over 2009, and were now only 4.9% below the historical market peak.
"This ends a year that showed a dramatic and somewhat unexpected level of turnaround in house values," QV valuation manager Glenda Whitehead said.
Dunedin overall showed a strong recovery, with a 4.9% rise pushing the average sale price to $276,875.
LJ Hooker real estate licensee Geraldine Hermens, of Dunedin, said the increase in southern Dunedin was caused by multiple buyers in the area, and a shortage of homes for sale in what was an affordable area.
But she warned that could give the market "a false sense of security", as it was likely to balance out before long.
Quotable Value registered valuer Tim Gibson also believed the figures reflected what had been a "big shortage" in the stock of lower-value homes on the market, which was pushing prices up when they were sold.
People were still "pretty cautious" about putting houses on the market, which was causing the shortage, although there were people looking to buy.
Real Estate Institute of New Zealand Otago branch president Stephen Johnston said he thought the situation was the market righting itself.
A year ago, there was a lack of activity in the "do-ups and rentals" market, but confidence was returning.
"The lower end of the market, and the upper end, have been very, very quiet."
The number of houses on the market in Dunedin dropped by almost half over 11 months in 2008, with similar declines recorded elsewhere in the region, although recorded sales have been increasing, with Otago showing a 12% rise in the number of house sales last September.
The central/northern city area rose by 2.8% to an average price of $289,560, Peninsula/coastal Dunedin by 2.8% to $250,136, and the Taieri 4.2% to $279,239.
Regional areas did not fare so well, with the Waitaki showing a 5.5% drop to $204,032, Central Otago a 2.7% drop to $296,566, Queenstown Lakes a 0.9% drop to $564,430, and the Clutha a 0.7% rise to $161,209.
Southland prices decreased by 5.7% to $202,504.
