Arrowtown has hit the $1 million milestone of house values, posing the possibility that future expansion can now only go skyward.

Up 20.8% on a year ago, Arrowtown has joined Kelvin Heights in the more-than-$1 million bracket in Quotable Value’s Queenstown Lakes housing region, while 90 Auckland suburbs have now hit more than $1 million.

Wanaka has edged over the $900,000 mark, by barely $1000, but with a 20%-plus gain in value from $745,750 a year ago, appears set to make a tilt at the $1 million bracket.

Arrowtown edged over the $1 million Quotable Value median value by $3000 for July, while Kelvin Heights is solidly into that bracket at $1.25 million, following a 33% quarterly gain.

Dunedin’s 15 suburbs covered by QV averaged out gains of 2.3%, ranging from 0.4%-4.5%.

Maori Hill is the sole $500,000-plus suburb and of the others, only St Clair and North Dunedin have passed $400,000.

QV national spokeswoman Andrea Rush there had been some new building within the Millbrook resort which may have been a contributing factor to the rising median values in Arrowtown.

"Arrowtown’s growth in value has been compounded by its ring-fence zoning.

"That means there is no more land becoming available in the town and the only way to intensify there now is to build up," Ms Rush said.

She said real estate agents had reported a continued shortage of houses as the inventory level of properties for sale fell.

"This is expected to put further upward pressure on value levels," Ms Rush said.

She noted Shotover Country, originally marketed as an affordable housing area, now regularly records sales in the $800,000 to more than $900,000 price bracket.

While Kelvin Heights was Queenstown’s first million-dollar suburb, Ms Rush said Fernhill, in Queenstown, notched up the highest rate of growth, by percentage, anywhere in the South Island.

Fernhill values rose 23.9% from $563,300 a year ago to $701,550.

The strong Queenstown growth was now flowing over into nearby towns such as Wanaka, Albert Town, Cromwell, Clyde and Alexandra, with their values also starting to accelerate.

"Cromwell has been particularly robust as it’s seen as part of the ‘Queenstown Loop’ that incorporates Cromwell and Wanaka," she said.

QV’s Dunedin valuer Duncan Jack said the quarterly price changes in Dunedin saw Mornington make the largest gain, up 4.5%, followed by St Kilda and South Dunedin both on 4.2%.

"These suburbs are good locations for both first-home buyers and investors, which is creating strong competition, which in turn contributes to pushing prices upwards," Mr Jack said.

Year-on-year, Maori Hill increased the most, at 12.4%.

Andersons Bay, Caversham, Green Island, Mornington, South Dunedin and Wakari all with increases above 11%.

Mr Jack said the majority of the greatest year-on-year increases were in some of traditionally lower value suburbs, due again to strong demand from both investors and first-home buyers.

Ms Rush said value levels around Queenstown Lakes were continuing to rise and with no signs of any easing of purchaser demand, despite the new loan to value ratio (LVRs) of a 40% deposit for investors, imposed by the Reserve Bank.

"The market is yet to assess the impact of the recent changes to the LVR rules, and as yet there’s no sign it has slowed value growth," Ms Rush said.

simon.hartley@odt.co.nz