A prominent economist has called for the Commerce Commission to look into the housing market, calling it a "borderline disaster".
House prices have continued to skyrocket in recent months, and the Government on Tuesday morning will announce a new set of measures to rein them in.
"What the Government has been talking about is skewing the playing field away from the speculators and investors towards first-home buyers," economist Cameron Bagrie told The AM Show on Tuesday.
"You've got to be pretty careful in regard to that, because the investors, the so-called speculators, they supply housing which people rent.
"But what we know at the moment is that if you're a first-home buyer, if you can get on the property ladder servicing the mortgage is actually relatively simple. It's actually cheaper to buy at the moment than rent subject to the big caveat of having that capital, having that deposit in place. The further house prices move up, the more difficult it is to get that deposit in place."
At present, investors and speculators who already own multiple properties make up the biggest share of buyers in the market - more than 40 percent - and the share of homes being sold to first-time buyers is shrinking, as the deposits required to get lending get further out of reach.
They're able to take advantage of interest-only loans, reducing the amount they have to pay each week, and are able to secure lending based on equity they already have, which first-time buyers can't do.
"The Reserve Bank is concerned about financial stability, which is just a fancy way of saying there's a little bit too much speculation out there," said Bagrie. "Of course if we look at housing through a social lens, we've got a borderline disaster here."
Both Prime Minister Jacinda Ardern and Finance Minister Grant Robertson have both said in the past they don't want to see house prices fall, mindful that many Kiwis pour their savings into the housing market.
"The housing market is a very big part of the New Zealand economy - it's an asset class that's up around $1.5 trillion," said Bagrie. "It's been a very big part of the economic story over the last 12 months, it's supported the economy, it's supported jobs, it's supported spending. It's helped get the economy sort of back on deck, so to speak. But there's other economic considerations."
The Reserve Bank has been accused of pouring fuel on the fire by keeping interest rates low, which has helped the wider economy by encouraging borrowing and investment, but much of it appears to have been funnelled into property. Bagrie expects the Government on Tuesday to announce an extension to the bright-line test.
"I think that's a guaranteed, a gimme."
While Ardern has ruled out a comprehensive capital gains tax, critics have said an extension to the bright-line tax - which currently covers properties sold within five years of purchase, after March 29, 2018 - would be a de facto capital gains tax.
Bagrie also expects the Reserve Bank to be given powers to implement debt-to-income ratios, which would stop investors from being able to borrow endlessly if their income can't support it.
"And I'd expect the Reserve Bank to pretty quickly get down the amount of interest-only borrowing that's taking place across the investor market."
While these measures might dampen demand, he says they do nothing to solve the supply problem, which could take 20 years to fix if more's not done.
"I don't know why the likes of the Commerce Commission haven't been unleashed. Give them $10 million and say 'it's a free-for-all, go for your life'. Look at the sector and see if we can drive some more competitive pressures into that industry, because we need it."
