But with a growing percentage of local residents unable to buy or rent property, the central bank has introduced a series of measures aimed at cooling the housing market.

A new global ranking of house price inflation reveals that, after adjusting for inflation, New Zealand has the world’s hottest property market.

In nominal terms, Turkey topped the list with house price inflation of 13.9%, while New Zealand came in second with 11.2%. Canada was the only other country to register double digit price growth, with house prices rising by 10% from year-earlier levels.

However, once inflation is taken into account, New Zealand came out tops with an 11% annual growth rate. Turkey, in contrast, slumped to 13th spot with a real increase in house prices of just 7%.

Auckland, which is home to a third of New Zealand’s 4.7 million people, is in the midst of an extraordinary property boom. A decade ago the average house price was NZ$0.5m (R5.3m) but last month the average price surged above NZ$1m (R10.6m) for the first time, an increase of 15.9% from year-earlier levels. The average price for a house in the city has risen by 86% since 2007.

At current levels, the typical Auckland home, at just under £560 000 (R9.5m), is higher than the average London property price of £472 384 (R8.9m).

Average rentals in Auckland have risen to over NZ$500 (R5 300) a week – accounting for 32% of the average household income in the city. Nationally, home ownership has fallen to a 60-year low. Unsurprisingly, the lowest home ownership rates are recorded in Auckland.

Demand for housing is being driven by record levels of immigration, low interest rates and a shortage of supply. Foreign investment in the housing market is also booming. In 2012, 37% of buyers were investors but today that has risen to nearly 50% - a significant number of whom are Chinese.

With local residents increasingly unable to buy a home and facing steep rents, New Zealand’s Reserve Bank has introduced a series of measures aimed at cooling the housing market. The Bank is unable to raise borrowing costs because of the weak economy so has focused instead on tightening lending restrictions, particularly for investors.

In October 2013 the Reserve Bank required banks to limit lending to borrowers with low deposits. This was followed in November last year with measures targeting investors in Auckland. In July this year, the Bank announced a further round of restrictions which require investors across the country to put down a deposit of at least 40% of the purchase price to obtain a mortgage. The new measures appear to be helping to cool the market, as banks begin to enforce the new rules ahead of their official launch in October.

Given that the Reserve Bank is considering further interest rates cuts to boost inflation, additional lending restrictions are likely in the months ahead.

Those living in Auckland are increasingly faced with a stark choice: relocate to a more affordable part of the country or abandon the dream of home ownership. But a lifetime of renting is not a particularly cheap option anymore either.

While some young professionals are moving out to more affordable provincial towns, the government is urging residents to consider higher-density, urban living. However, Kiwis are not overly fond of apartment living – preferring the “Kiwi Dream” of a detached house and a large yard.

As a market commentator recently noted, the “Kiwi Dream” is not yet dead. But it is no longer possible without major financial sacrifices or at least a willingness to relocate and start all over again.

Prepared by Sandra Gordon | Research and Market Analyst at Pam Golding Properties