Shortage driving house prices up

However, if market participants were to suddenly lose confidence in the property market then fundamentals could give way, the bank said.

The market would also be at risk of a major correction if short-term players dominated the market with the effect of keeping long-term investors away because of exorbitant prices. But there was little evidence of either of these cases unfolding in the New Zealand housing market.

This was because a sharp increase in demand from 2001 to 2002 had cleared surplus stock. This created a shortage that was expected to persist for some time, the bank said...

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