Prices will keep rising: Economist

Investors are also increasingly looking to buy he says, driven by expectations of rent rises and capital gains.

“Supply of new houses will grow soon but the Christchurch rebuild and loss of tradespeople to Australia means the supply rise will be limited.”

He said that meant house prices were likely to rise over the next three-to-five years. “Especially as building standards will continue to be raised.”

He said this would create a housing crisis for people on low-incomes.

He said there was no way to tell for sure what interest rates would do over the next few years but he would recommend floating rates for borrowers.

He said the 5.4% two-year rates would appeal to some borrowers but could leave them in a worse position in two years when rates started to rise again.