House prices down sharply in January

The Real Estate Institute says a sharp fall in the median house price in January is not the start of a bigger correction in prices.

The median price fell back from its all-time high of $389,000 in December 2012 to $370,000 last month.

The 4.9% fall in the median house price between December and January was the largest monthly fall since Real Estate Institute records began in 1992.

But chief executive Helen O'Sullivan says once the size and quality of the houses is accounted, the median price fell just 1% during the month.

Ms O'Sullivan says sales volumes were the highest for the month of January in five years, but remain well short of the peak of the market in 2007.

"It's really a continuation of a trend that we saw over 2012, with the number of transactions in the market picking up considerably from 2011. We're seeing the rate of increase starting to slow, but certainly there's still a considerable lift on those 2011-12 figures."

Ms O'Sullivan says the median price in January was 4.2% higher that it was in January 2012.

She says January is traditionally a tricky month to get an accurate picture of the housing market due to the impact of the summer holidays, but a number of factors are contributing to the robust demand.

Prices in Auckland and Christchurch are being driven up by a property shortage, she says.

It took an average 41 days to sell a property in January, compared to 47 days the same month in 2012.

Westpac economist Dominick Stephens says prices will continue to rise so long as interest rates remain low.

But Auckland mortgage broker Christine Lockie says even a half a percentage point increase in the Official Cash Rate would now struggle to rein in prices.

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