Confidence in housing remains high: ASB survey

Chief economist Nick Tuffley said the majority of respondents still see now as a good time to buy a house with a net 48%. The survey also recorded a "marked shift in house price expectations" with a net 40% of respondents predicting prices will climb in the next 12 months.

"This turnaround in house price expectations is the largest recorded shift in the survey to date," Tuffley said in a statement. "Lower short term interest rates and evaporating fears of further market decline have no doubt contributed to the very positive outlook for house prices."

House prices hit a 10-year high $355,000 for the month of October, according to Real Estate Institute data, while QV Valuation data showed property values climbed above last year's levels for the first time this year. The revival in property has underpinned the country's economic recovery, though the central bank said in its Financial Stability Report house prices are high relative to incomes and this "may limit scope for a sustained rise."

Tuffley said the housing market has "swung firmly back to being a sellers' market" with the turnover of houses stalling amid strong demand and short supply. Rising net migration and a reduction in issuances of new building consents has contributed to the shortage.

Still, Tuffley expects rising mortgage rates over the coming year will damp demand while a pick-up in construction will boost supply.

"House prices look set to keep rising into the new year, something that is likely to challenge the Reserve Bank of New Zealand's resolve to keep interest rates on hold until the second half of 2010," he said.

Legislation could also have an impact on the market, according to the report, with the "strong desire" amongst policy makers to discourage residential property investment likely to see a change in the tax treatment for the sector.