Officials say house prices falling would be the "worst-case scenario" for our economy while it recovers from a recession.
Reserve Bank (RBNZ) chief economist Yuong Ha referred to house prices falling as a "deterioration of wealth", which could not be afforded during the COVID-19 economic recovery.
"The worst situation we could face right now would be to see house prices fall," Ha said.
"That's always the flipside, would you be dealing with a COVID recovery and a disruption of wealth in lower house prices."
The RBNZ is preparing to implement never-used-before measures to drop interest rates for loans like mortgages even lower, including a negative official cash rate and giving money to banks at a cheaper rate.
Such moves would push house prices up further by increasing demand.
"We acknowledge that asset prices will rise, and house prices are the key one."
The policies were likely to be ready by the end of this year, but a decision to use them had not yet been made.
It comes as the property market continues to defy the recessionary odds.
Newshub witnessed a three-bedroom home in Auckland's Sunnynook, sell for $2.33 million at auction on Thursday morning. Its capital value is $1.1m according to CoreLogic.
Sellers Brian and Mary Aldersley were gobsmacked after expecting $1.6m.
So shocked they were in tears, tears of joy.
Pinakin Pittani and his family have been living in their three bedroom rental for three years.
He and his wife have $80,000 saved, enough for a 10 percent deposit for an $NZD880,000 house.
They are desperate to buy their own home but what they have saved isn't enough in this market.
"When the CV is $700,000 to $750,000, you think you must get that house right? But you don't get it, because there must be some more people who like that house and they just go crazy," Pittani says.
So who's buying at these prices?
"Everybody. At the moment it is hard to pick a particular category," Barfoot & Thompson auctions manager Campbell Dunoon says.
"We certainly have the investors back, there's no doubt about that, we're certainly seeing first home buyers, so they are in attendance, I think low-interest rates have certainly helped that."
In Newshub's Leaders Debate, Prime Minister Jacinda Ardern said she wanted house prices to stabilize while today National leader Judith Collins said she wanted affordable housing but didn't necessarily want prices to drop.
