Despite residential property prices in New Zealand hitting an all-time high, economists are concerned that higher mortgage rates could dampen the market.

Figures from the Real Estate Institute of New Zealand reveal ed that average property prices have risen in 11 out of 12 districts during December 2009 compared to the same period in 2008, with the national median up +9.6% ($360,000) compared to 2008 and the median price for November up by $5,000.

The largest gains were Nelson/Marlborough, which rose by +14.5%, followed by Southland up +10.8%, with Hawke’s Bay increasing by +9.4%. Northland was the only district to experience a drop in median prices, down just over -2%.

Peter McDonald, REINZ president, said: ‘House prices have definitely stabilised and appear to be slightly gaining, which is a positive sign. The median house price for December 2009 was up 1.4% on the previous month so, while the median price for December 2009 was a record high for that time of the year, it’s a case of steady as it goes,’

Properties are also selling faster according to Peter McDonald, as the national median for days to sell in December 2009 was 33, that’s 12 fewer days than the corresponding period in 2008. The fastest sales were in Wellington at 28 median days and in Canterbury/Westland and Otego, where the median days to sell was just 29.

However Bernard Doyle at Goldman Sachs JBWere believes that recent fixed mortgage rate increases are contributing to an easing of housing market demand and that if the figures are seasonally adjusted a different picture emerges.

Doyle, said: ‘Seasonally adjusted house sales declined - 3.5% month-on-month in December, the third consecutive monthly fall. Sales turnover is now 17% below the levels achieved in April, 2009,’

‘The 2010 outlook is a lot more balanced than last year. We do expect house prices to post modest gains. However, with interest rates set to rise and the labour market remaining subdued, any rise is likely to be gradual. ’