The organisation that represents property valuers says the hot Wellington market doesn't have the fundamentals to justify the boom.
The Property Institute says there is a concern around any region where the growth that's taking place in property values isn't actually based on either population or jobs.
Property Institute CEO Ashley Church says there are a number of regions like that, but singles out one of the biggest - Wellington.
In the latest Quotable Value (QV) House Price Index, Wellington city's year-on-year growth to July came in at 15.9 percent.
"Wellington, where population is relatively static and where the jobs are relatively static but where there is a dramatic increase in property values, there is cause to be concerned about the values there," says Mr Church.
"That's true to a greater or lesser degree of other parts of the country as well. It's particularly true of some of the smaller area like Bay of Plenty, which went through the same thing prior to 2007 - saw massive increases in their value that wasn't based on fundamentals around population growth - and so those values dropped back dramatically at the time of the global financial crisis (GFC)."
Wellington's growth is on a par with Auckland's (16 percent) now, but lags behind Tauranga (25.7 percent) and Hamilton (31.5 percent).
Mr Church says as high Auckland prices are, they are based on something reasonably fundamental and it's unlikely they are going to come back down any time soon - and when that boom does end, it's still unlikely that those prices are going to come down.
"The much vaunted correction I think in the case of Auckland is pretty unlikely. But the further south you go, the nature of the investment taking place becomes much more speculative and what that does is create a bubble which sets up a potential for the property values in those areas to drop quite dramatically."
Mr Church says that has major implications on the banking sector, people's net equity and the ability to fund businesses that rely on the equity that people have in their homes.
The Reserve Bank has foreshadowed stricter loan-to-value restrictions for investors, where they must have a minimum 40 percent deposit.
In QV's commentary published with the latest statistics, Wellington registered valuer David Cornford says: " While it's too early to say how much impact recently announced loan restrictions will have on the market, there have been some instances of 'panic buying', with some auctions seeing a surge in the number of registered bidders as buyers try to use pre-approved finance before stricter minimum deposit requirements take effect."
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