Fewer people believe it's a good time to buy a house, but prices are expected to keep rising, according to ASB Bank's housing confidence survey.
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The survey, spanning three months ending January, found 9 percent of respondents believed it was a good time to buy a house, compared with 13 percent in the previous survey.
"The trend improvement in buying sentiment of the past few years was brought to a halt in January," ASB chief economist Nick Tuffley said.
Positive sentiment was strongest in Canterbury and Auckland.
A net 54 percent of those surveyed expected house prices to rise over the next 12 months, double the level in the October survey, and the highest level in three years.
At the same times, the percent of people who thought interest rates would rise or fall was evenly balanced, whereas in the previous survey nearly a third thought interest rates would fall over the following 12 months.
"Respondents' interest rate expectations have been wrong-footed several times over the past year thanks to volatility in the global and local economies and some mixed signals from the RBNZ," Tuffley said.
However, he said the Covid-19 virus was likely to have a cooling effect on activity in the short term, but the dynamics of the market remained the same of demand exceeding supply.
"Housing demand is running hot on the back of the large falls in mortgage rates we've seen over the past year. At the same time, the supply of new listings to market has remained fairly anaemic. House prices are squeezing higher as a result," Tuffley said.
House prices have had their strongest lift in more than four years reflecting "underlying confidence coupled with strong economic fundamentals", the Real Estate Institute (REINZ) says.
All regions captured by the REINZ house price index reached record highs in February with a year-on-year increase of 8.7 percent.
