A national survey of the housing market says low interest rates and a shortage of new housing are expected to drive up prices over the coming year.
The New Zealand Residential Property Overview was conducted by Infometrics for the mortgage insurance company QBE-LMI.
The report says the housing market is stabilising after a significant downturn last year. Prices could now grow by as much as 11% over the coming year and by 24% over the next three years.
Median house prices climbed to $339,000 in the June quarter from a low of $330,000 in March.
The volume of house sales is up 41% in the June quarter compared with the same time last year.
Infometrics says the recovery is largely attributed to a drop in mortgage rates since the middle of 2008, improving the affordability of property for investors and first home buyers.
Residential property is also taking a shorter time to sell. Infometrics says construction of houses is down, as 14,000 new dwellings were approved in the June year compared with demand of 21,000 new houses per year.
Informetrics says housing demand is also being driven by an increase in net migration and fewer New Zealanders moving overseas.
Scepticism at report
A web based property investment writer is sceptical of the predicted increase in house prices.
Bernard Hickey, from interest.co.nz, says he is not sure prices will rebound any time soon, as unemployment is rising and the amount banks are lending is still slowing.
Mr HIckey says if there is a return of strong growth in house prices New Zealand risks slipping back into bad habits "of borrowing heavily overseas simply to pump up house prices, pushing up the New Zealand dollar and strangling the export sector."
He says people risk falling into the trap of over investing in property.
The head of Massey University's property studies department says the report is very optimistic.
Professor Bob Hargreaves says there is an under supply of new homes being built so that will stimulate the market, with demand outweighing houses available.