Average house prices rose by almost 5% in Northern Ireland during the first quarter of this year.
However recovery is patchy and could still be affected by steps the Westminster coalition takes to reduce the public deficit, the University of Ulster study said. The average price of a house was almost £170,000.
The number of sales from January to March fell because of the cold weather and changes in stamp duty which encouraged a flurry in activity last year.
The report authors said: "The findings suggest that recovery is patchy and varies across different property types and areas of Northern Ireland.
"The pace of growth is likely to be impacted by macroeconomic conditions and the steps that the new government takes to reduce the public deficit."
The average price of a house in the first quarter of this year was £169,497 compared to £161,429 in the final quarter of 2009.
The number of sales fell back to 800 in the last quarter from more than 1,000 before the start of the year. This is due to market difficulties, the reinstatement of stamp duty on houses costing less than £175,000 from the start of the year and the cold weather, the report authors said.
Bank of Ireland economist Alan Bridle said: "Eastern areas such as Belfast and north Down seem to be seeing some signs of recovery but the picture for mid Ulster and the west remains particularly challenging.
"The recovery will be patchy and uneven in 2010 and I expect the average house price to remain a little erratic until sales volumes return to more normal levels."
He said the market is increasingly influenced by the private rental sector which has grown significantly because investors or owners are unable or unwilling to sell at the new lower price levels, while demand has risen from those who find it harder to obtain a mortgage or who have deferred buying a home in the belief prices will fall further."