The indicator, which runs from negative 10 to plus 10, climbed to a positive 6.68 in August, from 5.39 in July.

It is a sensitive measure of the housing market and includes three main factors: changes in the number of houses sold, changes in price and the time taken for houses to sell.

"The rate of turnover in the housing market is the fastest in almost two years," says Mike Pero Mortgages chief Shaun Riley.

In August, it took an average of 34 days to sell a house, 21 days fewer than in August last year, and three days better than the 37 days taken in July this month.

"The reduction in the time taken for houses to sell, when compared with a year earlier, is the fastest improvement since records began in 1991." Riley says.

The median house price also rose when compared to August last year, up 5.1% to $346,750, the first annual rise since March 2008 and the largest increase in 21 months.

The number of houses sold was up 39% from a year earlier, and stable month-on-month.

"The big markets of Auckland and Wellington are showing strong signals and are leading the market according to the Property Cycle Indicator," Riley says.

Wellington led the country with a PCI of 7.8, from 6.57 in July and Auckland was not far behind with a PCI of 7.25, up from 6.92 in July.

In the South Island the Canterbury/Westland PIC was 4.78, slightly up from 4.49 in July; Otago was at 2.6, compared to 2.2  a month earlier, and; Nelson/Marlborough was at 2.9, up from 2.07 in July.