"The people buying at the moment recognise that the market is going to tighten up. That doesn't mean in a year's time one will be paying over the odds for a property.
"It simply means in my opinion you will be paying 5 per cent more for a property than that what you will be looking at now."
A net 19 per cent of agents felt buyers were in the market to trade down, the highest number on record.
"This feeds into my view that the economy is still fundamently fairly subdued and I think households are still feeling cautious with a lot of their spending."
Meanwhile agents reported 25 per cent of buyers were reluctant to commit to a sale because they felt prices might decline, a figure that has held steady over the last two months.
Worries from buyers about securing finance increased slightly to 18.9 per cent, despite low interest rates.
The survey showed a reluctance of buyers to transact in Wellington, Manukau City, Whangarei, Hawke's Bay, Mount Maunganui and Marlborough.
Alexander said he expected the improving house market to benefit the wider economy.
"Now that we see a lot of the first time buyers coming into the market I expect to see more building construction."
