ANZ National Bank's eight gauges of the property market found house affordability is back to "fair" levels, and the turnaround in sentiment has seen borrowers lock in longer mortgages as the prospect of rate hikes begins to grow.
Of the eight indicators, three were negative for house prices, one was neutral with a negative bias, one was neutral, two were neutral with a positive bias, and one was positive.
Affordability was neutral for house prices, which had regained some semblance of normality after a stabilisation in the market over the past four months, and borrowers were looking towards the future when reviewing their mortgages.
"A turnaround in household sentiment has resulted in borrowers wishing to lock in longer fixed mortgage rates ahead of an anticipated monetary policy response to growing economic momentum," the bank said in its commentary.
Still, the report warned that in previous cycles similar levels of improvement preceded an easing in prices.
"If the Australian economy continues to improve, then more New Zealanders may decide to dust off their plans to shift across the ditch," it said.
Migration continued to boost house prices as the inflow of migrants stoked demand for new housing, with a net 15,600 people coming to New Zealand in the year ended August, according to government data.
ANZ National said the supply-demand balance and consents and house sales were neutral with a positive bias, as the flock of migrants continued to underpin the sector.
Interest rates remained neutral with a negative bias as the mortgage curve begins to look stretched and the market begins preparing for the central bank to start hiking rates next year.
Serviceability and indebtedness, liquidity, and globalisation were the three indicators dragging prices down for yet another month.
The bank concluded that house prices will probably ease, although things are very hazy.