Record house prices are putting more pressure on the Reserve Bank to take steps to cool the market.
The Real Estate Institute's housing price index hit new highs in May, when it rose 0.7% from April and was 8.7% higher than May last year.
Auckland's prices surged nearly 15% to a new record, Christchurch prices rose 13%, and other South Island regions were up 5.4%.
The main drivers are under-supplied housing markets in Auckland and Canterbury and mortgage lending rates at 50-year lows.
Institute chief executive Helen O'Sullivan says some first time buyers are moving into the market before new restrictions come into force on lending to people with low deposits.
She says some developers are returning to the market, at least in terms of apartments.
But Ms O'Sullivan says it's a long cycle which takes time for the supply side to respond and there are still a lack of developers in Auckland and constraints on the finance sources available to those developers.
She says the volume of sales and prices are starting to lift in other parts of the country, such as Hamilton and Wellington, but they are still reasonably modest increases compared to Auckland and Christchurch.
Ms O'Sullivan says the number of houses sold rose 7.5% last month, the best May for six years.
Although the Reserve Bank kept the official cash rate on hold at 2.5% on Thursday, economists say the latest house price data will fuel worries about financial stability.
ASB senior economist Jane Turner says rising house prices outside Auckland and Christchurch add to the concerns.
She says it suggests that it's becoming more appropriate for the Reserve Bank to respond to higher house price inflation by lifting the Official Cash Rate, particularly as low interest rates are one of the factors contributing to the pick-up in demand.
Ms Turner says the Reserve Bank must balance the pick-up in house price momentum with an elevated New Zealand dollar and low inflation pressures.
She says the Reserve Bank would want to ensure the recovery has been more self-sustaining before lifting the Official Cash Rate and Ms Turner expects that won't happen until early next year.
She says any moves by the Reserve Bank to restrict growth in lending to those with smaller deposits will have limited impact on house prices because it won't put off buyers with a lot of capital.