New Zealand homes are overvalued by 25 per cent and the country is one of nine under threat of a housing bubble burst, says the Economist.
But the leading international publication's feature report - headlined House of Horrors - has been rubbished by real estate industry insiders.
The Economist ranked New Zealand in the world's top overpriced markets along with Australia, Belgium, Canada, France, Britain, the Netherlands, Spain and Sweden.
It described the nine countries as being at the same stage as the United States towards the peak of its housing bubble.
It said that the countries could be at a danger point and that householders had extremely high levels of borrowings, making them more vulnerable to a house-price shock.
New Zealand's QV agency has found house prices nationally have dropped only 4.4 per cent below the peak in 2007, and yesterday Barfoot & Thompson released data showing the November average selling price rose by 2.5 per cent on October to $567,489, its second-highest average monthly price ever.
The Economist warned that the "bursting of the global housing bubble is only half way through".
But two leading New Zealand real estate agencies rubbished the claims.
Barfoot & Thompson managing director Peter Thompson said house values were set by the buyer and the vendor, and the article was "basically calling all buyers and vendors fools".
He believed the value of homes was influenced by a quickly growing urban population and an increasing housing shortage.
"A lot of the houses these days are sold by auction and when you have limited choice, especially in the inner city, like Mt Eden, Epsom, you get three or four parties that are wanting that one property. That's how the prices go up."
Bayleys senior property research analyst Ian Little said it was "bemusing" when economists assessed the value of homes "on such a broad generalisation".
"In effect, the real assessment of a property's value comes from the market itself - that is, what any one individual is prepared to pay for any one home.
"Those New Zealanders 'trading up' to new homes are doing so with a new-found financial NZ houses 25 per cent too dear: top journal
understanding which has become evident over the past three years.
"People have become extremely 'savvy' with their funds in recent years, and this is reflected in how they value a potential new home, and the offers coming through."
But Shamubeel Eaqub, principal economist for the NZ Institute of Economic Research, said New Zealanders had a housing obsession which he wanted broken.
"Our housing woes are a symptom of a rotting core. Misdirected liquidity and incentives have led to wasteful pursuit of capital gains in housing, rather than entrepreneurship and sustainable economic growth. These are issues we should tackle," Mr Eaqub said, calling for deep structural and political change redress.
Demographia, an international survey, has also regularly found New Zealand housing overpriced. Auckland was labelled the 12th most "severely unaffordable" housing market in its annual survey out in February.
Some economists have challenged Demographia's findings, saying wages are low in New Zealand so comparing those to house prices gives an artificially gloomy view.
Darren Gibbs of Deutsche Bank said inflation-adjusted prices had dropped 15 per cent since the end of 2007. He said prices were now rising in Auckland "and that couldn't be happening if houses were unaffordable".
Calculation devices employed by the Economist to put houses into the over-priced category were a price-to-income ratio and a price-to-rent ratio.
"Based on the average of the two measures," the magazine said, "home prices are overvalued by about 25 per cent or more in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden.
"Indeed, in the first four of those countries, housing looks more overvalued than it was in America at the peak of its bubble.
Additional reporting: Isaac Davison