Auckland has seen a massive growth in house prices, but leading economists say prices could fall like those in Sydney and Melbourne.
"The risk has arrived on the horizon and that would be contagion from a more marked slow in the Australian market than otherwise expected," ANZ chief economist Sharon Zollner told TVNZ1 Q+A's Corin Dann.
The Reserve Bank Governor, Adrian Orr says New Zealand's housing market shares common ground with Australia because it has benefited form the same global investment trends of recent years.
He says it's possible prices in New Zealand could fall too.
"You could see a similar fall, that's not in our projections, but it's in the realm of possibility, likewise you could see a rise," he said.
In a forecast this week the Reserve Bank predicted house prices across the country to stay positive at around two to three per cent per year for the next few years.
But Mr Orr says even if prices fall, there's little cause for concern.
"House prices relative to income is highly elevated and there is an enormous amount of wealth captured in the equity of homes they own, now a house price decline does not mean a housing market crisis, far from it."
One factor likely to help underpin house prices is low interest rates with Mr Orr surprising some in the market this week by pledging to keep rates low until 2020.
In addition, Mr Orr countered the gloomy view of some in the business sector by delivering an upbeat assessment on the economy.
"The signs are very positive, you have a lower exchange rate so we are earning more for our off-shore efforts, the world growth is still very strong, the government is out spending and investing."
Mr Orr says given all those factors now is a good time for businesses to invest.