Nz house price rises 'unsustainable'

The rapid rises in house prices in the Auckland and Christchurch markets are unsustainable, says Westpac.

The bank released a report on the housing market today saying increasing values in those areas were due to a shortage of homes and that the rest of the country was unlikely to see such large rises.

"We expect higher interest rates and a burst of construction activity to curtail the market in years to come," Westpac chief economist Dominick Stephens said. 

Nationally, house prices were up 4.3 per cent last year according to the Real Estate Institute.

Stephens expected house prices to rise a further 5 per cent overall this year, then stay flat in 2013 before falling 1 per cent in each of the following two years.

"Our fear is that prices could rise more than 5 per cent this year, particularly if the Reserve Bank dallies on hiking the official cash rate. And we do use the word 'fear', because the further prices rise in the short run, the further there could be to fall over a longer horizon," Stephens said.

He warned homeowners not to get too excited about rising prices because he expected the current burst of house price inflation to be temporary.

Source: Stuff.nz