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Updated at 8:15 pm on 9 November 2012
New figures show the median house price has surged to a record high of $380,000 and sales have jumped almost a third since last year.
Adjusting for some variations, the median house price in October was 6.9% higher than the same month in 2011.
The increase has been mainly driven by rising prices in Auckland, Wellington and Christchurch, the Real Estate Institute of New Zealand (REINZ) says.
Auckland's median house price also set a new record, rising 14% from last year to $530,000.
The institute says 6640 properties were sold in October - 1633 more than in October last year.
REINZ chief executive Helen O'Sullivan says a surge in new listings is struggling to keep pace with buyer demand. She says it took an average of 32 days to sell a property in October - three fewer than last year.
Deutsche Bank's chief economist Darren Gibbs says the Reserve Bank needs to push ahead with developing tools for clamping down on bank lending.
Mr Gibbs says one method would be to force banks to require larger deposits. He says there is no need for this yet - but it may become necessary.
"Will this price appreciation continue, will it become credit-fuelled? If that was to occur, then that would clearly be of concern to the RBNZ - not just what it would mean for monetary policy, but also from the point of view of financial stability.
"It may well be the case that we find in coming months that we do need lower interest rates for the business sector, but we don't need lower interest rates for housing."
But Bank of New Zealand chief economist Tony Alexander believes house prices are likely to continue their rise and nothing can be done to control that.
Mr Alexander says the increase is driven by a shortage of supply - particularly in Auckland and Christchurch - and is due to high building standards and material costs which can't be simply addressed.
He says the housing market is not out of control and sales will eventually ease.
ASB senior economist Jane Turner says supply is very low, with few new listings and the total stock available at very low levels, so the small increase in demand is outstripping supply.
Copyright © 2012, Radio New Zealand
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