House prices could increase by 12 per cent over the next three years, a mortgage insurer says.
A report into the country's housing market, released yesterday, finds a shortage of new housing is driving property values up.
Conducted by Infometrics for Australian mortgage insurer QBE Lenders' Mortgage Insurance, the report also highlights that the median house price has edged up to $356,000 - an increase of more than 1 per cent in the past 12 months.
Infometrics general manager Gareth Kiernan said low building activity in Auckland in the past six years was one of the leading factors in the projected increase in house prices.
Over the next three years, the report predicts, Auckland house prices will rise 16 per cent.
"There is a definite undersupply in Auckland compared to other parts of the country," Mr Kiernan said.
"And then there's Canterbury, where a large chunk of their housing market was knocked out by the earthquake which needs to be replaced and that will take some time too."
Auckland will also benefit from an increase in demand from first-home buyers as the city's economy starts to improve.
The largest increase forecast in housing prices is in Hawkes Bay, where property values could rise by as much as 20 per cent between June 2011 and June 2014.
The introduction of tax changes by the Government had adverse effects on demand for property over the past 12 months - especially at the lower end of the market, the report says.
However, it predicts that the influence of the tax changes will subside as house prices improve next year.
Mr Kiernan said the increase meant the market would become more friendly to sellers than it had been for the past three years.
In contrast, a report released by the Real Estate Institute of New Zealand yesterday says the median price fell 4.2 per cent to $345,000 in July from $360,000 in June. REINZ describes the fall as a "mid-winter breather".
Mr Kiernan said the discrepancy between the figures was because the QBE Lenders' Mortgage Insurance survey took its figures from three-month averages, while REINZ used monthly ones.
ON THE RISE
Predicted house price increases in the three years to June 2014
* Auckland: +16 per cent
* Northland: +11 per cent
* Hawkes Bay: +20 per cent
* Waikato,Bay of Plenty,Gisborne: +3 per cent