Annual house price inflation has reached the highest level seen since late 2007, ANZ says in its latest Property Focus report.
But the bank says it questions the ability of that inflation to translate into a boom without a supportive labour market to back it up.
However, of the bank’s ten gauges that indicate which direction it expects the housing market to go, none are pointing completely down.
Interest rates are still deemed to be putting upward pressure on prices.
“Long-term fixed rates are at record lows,” the bank notes. ANZ’s economists said the bank’s one-year fixed rate of 5.19% was worth considering not because it was expected that rates would rise much in that time but because it was considerably lower than floating rates.
ANZ says it expects interest rates to rise but not for a while and not by much.
The report notes that migration is becoming positive, which will put heat in the market. Household debt is up, which would normally cool house prices, but debt servicing is still at a 10-year low.
It says the Reserve Bank’s moves to cool demand through macroprudential tools might help but the problem was not just housing demand. Supply is a big factor and while it is starting to creep up, large shortages remain in Auckland and Christchurch.
Overall, it says the likely direction for prices is still up, citing a “bubbling undercurrent” that remains in place.