New Zealand's housing market is the most over-valued among the G-10 economies, and there's a 40 percent chance it will go 'bust' in the next two years according to Goldman Sachs.
The global finance company defines a housing market bust as house prices falling five percent or more after adjustment for inflation.
The firm's report looked at housing markets in the G-10 countries - those with the most-traded global currencies - and found that they were most elevated in small, open countries like New Zealand.
In Auckland the average price has shot up 91 percent since 2007, to more than $1 million.
Goldman Sachs compared house-price levels across economies by three measures: the ratio of house prices to rent, the ratio of house prices to household income and house prices adjusted for inflation according to Bloomberg.
It found New Zealand house prices were most over-valued, ahead of Canada, Sweden, Australia and Norway and that "the probability of a housing bust over the next five to eight quarters is the highest in Sweden and New Zealand at 35 to 40 percent."
The risk in Australia is about 25 percent, according to the report.
It also highlighted that immigration booms are boosting the demand for construction, and that debt servicing ratios are low due to record-low interest rates and "a modest consumer deleveraging cycle after the 2008-09 recession."
"Prices do appear overvalued and credit growth has been high - traditional warning signs of real house-price declines."
Goldman Sachs said its model does have a few drawbacks including that it predicts housing busts too often.
Economist Shamubeel Eaqub says that there's no need to be alarmed by the report, and in fact "we want prices to come down" and this would be a relatively modest fall.
"Don't we want houses to be more affordable?" Mr Eaqub asks.
"There are winners and losers in all of these things, and not everyone can win."
Mr Eaqub says that put into context, it's not a big deal for house prices to drop by five percent when they have doubled in recent years.
He doesn't think there would be a crisis if prices fall a little, and says it's important to focus on why houses are so unaffordable in the first place, and that it's largely due to an undersupply of housing and insufficient rights for renters.
By his estimates, he calculates New Zealand is short of 480,000 houses because the country has not built enough homes to keep up with population growth or the changing make up of households.
On Tuesday the Government announced that it will build 34,000 houses in Auckland in the next two years, however included in that figure are 8,300 existing social houses that will be demolished and replaced.
Mr Eaqub says that while it's a step in the right direction from the Government, it is "not big enough" and "not aspirational enough" to count.
"We need to build a lot more houses, large and small", he says.
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