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Housing market - house for sale - Source: ONE News
New Zealand's housing market is displaying all the symptoms of a bull market, Westpac says in a report.
Improved economic confidence was no doubt playing a role in the housing market's revival, the bank said.
Strong population growth combined with lack of building activity was creating a shortage of new houses.
Low interest rates were also driving the bull market, Westpac said.
"If this market remains hot, houses could become overvalued again," Westpac said.
House prices are now 8% higher than in January 2009, though they remain 4% lower than the November 2007 peak, according to the Reinz Monthly House Price Index.
Prices have gone up 4.2% over the past three months.
The market recovery is led by major urban centres, particularly Auckland, which were also responsible for the leading prices down in 2008.
According to Quotable Value, annual price gains in Wellington, Christchurch and Auckland have exceeded the national average gain.
Market conditions will favour rising prices for some time, according to Westpac, which also said it expects the annual rate of house price inflation to go double-digit by the middle of 2010.
In 2010, Westpac expected interest rates to rise, and a strong increase in house building. This could negate the market's short-term strength and possibly cause another brief period of housing price decline or a longer period of house price stagnation.
Westpac said it has the downturn pencilled in for late-2010, but the timing was extremely difficult to pick and depended on when the Reserve Bank raised the official cash rate.
