The Prime Minister says parts of New Zealand are showing signs of a property boom and suggests the housing market is "about to take off".
John Key told TV ONE's Breakfast that rent and house price increases in Auckland and supply shortages are symptoms of a looming property bubble.
Asked if he thinks a property boom is coming, Key said supply is starting to bubble through to the surface but it is quite slow.
"All the indications are that in certain parts of the country, particularly Auckland...these are a function of internal and external migration taking place, and not enough supply coming through," he said.
Key's comments came as Bernard Hickey from interest.co.nz and Alistair Helm from realestate.co.nz joined Breakfast to debate the issue.
Hickey said the current "no worries" attitude about the housing market is similar to the pre-2003 outlook.
"We need to worry about asset bubbles and when we see house prices rising more than 20% year-on-year, in Auckland, we should at least be watching closely and the Reserve Bank Governor and the Finance Minister should be watching - because it looks like New Zealand has not changed that much," he said.
According to Hickey, bank lending habits are also mimicking the lead up to the last housing bubble.
"Some of the same things are happening," he said. "We are seeing quite a lot of 90-95% home lending by three of the major banks - so much so that the one that isn't doing it is complaining and saying this is a worry."
Over the last few weeks, 100% home loans for apartments have been given, said Hickey.
"So total lending isn't increasing over all, that's because most people are looking to repay their mortgages. But at the fringes, we are seeing the same bubble-like activity."
Putting it in perspective
However, Helm of realestate.co.nz told Breakfast the housing market needs to be put in perspective.
"Markets move not just by price indicators but by volume," he said.
"Last year we saw 60,000 sales in New Zealand. At the peak of the market at 2004 it was 120,000. We've come from the low point to 60,000, we might go up to 75,000 this year, we're not back at the 80,000 - 90,000 when the Reserve Bank was relaxing financial constraints, when interest rates were significantly higher and where the property market took off."
Helm said we are not seeing as many investors as there were in the period between 2004-2006.
"When that starts coming back we can get a bit more of a bubbling of the market. Contextually, prices, if you take out inflation, are still down five percent, compared to where the peak of the market was," he said.
Despite prices being down across the country, Hickey told Breakfast that parts of Auckland are seeing large rises.
"It is a concern when Auckland, which leads the market, has suddenly gone hot. And you can see it in all sorts of ways," he said.
"Auction clearance rates are very high - prices, CVs that were less than a million, we're seeing prices go for 1.3, 1.4 million, and this is a worry for an economy that thought it had weaned itself off being just a housing market with a few things tacked on."
Hickey said housing supply is still a problem in Auckland and
should be addressed by both central and local government.