Auckland's housing crisis is expected to get much worse before it starts to get better.
A new analysis of the situation released by Auckland Council shows the city's housing shortfall rising from 15,000 to more than 24,000 by 2018, reports Radio New Zealand.
Assuming between 11,000 and 12,000 new homes are built every year – well above the past 12 months' 8100 – the present shortfall won't be achieved again until 2025. By 2028, Auckland will still be 11,500 houses short.
The analysis, using a system developed by economists at BNZ, assumes 80 percent of all consents turning into builds. If 90 percent go ahead, the shortfall would be completely eliminated by 2027, according to Radio NZ.
But higher population growth and immigration would see the problem last even longer than council expects.
In the last year, house values nationwide have increased by 10.1 percent, with nearly half of that coming in the last three months. In Auckland, prices have jumped 18.8 percent, and are now more than 50 percent above the 2007 peak.
Financial advisor Martin Hawes says the growth is unsustainable, particularly with the average price in central Auckland now pushing $1 million.
"If you look just two years ahead at this kind of growth rate, you're looking at the average house in the old Auckland city area, of $1.45 million," he said on the Paul Henry programme this morning.
"If you go out five years, then it's actually near enough to $2.5 million. It gives you some kind of idea of the scale of the rises that we are seeing at the moment."
As long as immigration remains high and inflation stays low, Mr Hawes says prices will probably continue to rise, regardless of how many new houses are built.
"The Government is working very strongly on the supply side of things – that is, build more houses. You can't just push a button and get more houses, so that's going to take a fair bit of time," he says.
"I think the price of money would make a difference, but the Reserve Bank can't do that because inflation's only at 1 percent. It's right at the bottom of its range of 1 to 3 percent, so that's not going to happen. We can forget about that happening."
If there is a crash, it may be a case of the Government's primary solution backfiring.
"The really big risk is that we over-build," says Mr Hawes. "Markets will almost always overreact… [maybe] at some point in a year or two or three, we'll get some kind of crash."
With Auckland becoming ever more unaffordable, more and more first-home buyers are starting to look to the regions, with the effect of pushing up prices in places like Tauranga and Hamilton.
The Waikato Chamber of Commerce however is excited about the arrival of Auckland housing market refugees. CEO William Durning says places like Hamilton have a lot to offer.
"Hamilton's positioning between the Ports of Auckland the Ports of Tauranga is that crossroads to allow products to be exported to the world," he told RadioLIVE.
Mr Hawes though warns that if Auckland collapses, it could take the rest of the country with it.
"I can't see any way that it's a good thing, because what I do fear is that if Auckland property prices do end up crashing, then there will be a contagion that will spread out to the regions, and that will be even worse for the country."
He compares the situation in New Zealand to pre-global financial crisis Ireland.
"I watched their property bubble inflate and I watched it crash again. Now, there are quite a lot of differences between Ireland and New Zealand, but there were some similarities – for example, they had very high immigration.
"But one of the things the Irish government couldn't do was control interest rates, because they're controlled in Brussels. So they just had to watch prices carry on, but basically the crash when it came, Irish house prices went down by 50 percent and it brought the country to its knees. It pushed the country into receivership."
Mr Hawes says the longer the bubble in New Zealand inflates, the harder it is going to be to pop safely.