Long-time property investor Olly Newland says Auckland's property bubble is too far advanced for the National Policy Statement and other land supply solutions to fix.
It's a situation one fund manager compares to the sharemarket bubble of 1986.
"You can't just go to a field and say 'let there be houses'," Newland told The Economy Hub video show yesterday.
"It takes years and years to turn that field into houses. You've got all the infrastructure, the drains, the pipes, the schools, the shops, the roads and everything," he said.
"You've got to put it all in first before you put the houses in."
The risk was that when we finally get there the demand will have moved on and prices will slump, he said.
Auckland Council will be required by law to open up enough land to build houses for its rapidly increasing population under a new policy released by the Government yesterday.
The NPS will require councils to over-provide by between 15 and 20 per cent the amount of land it estimates is needed for new housing and business growth, based on quarterly statistics that they will have to start collecting, including "housing affordability indicators, resource and building consents, price signals and business land vacancy rates".
Salt Funds Management managing director Matthew Goodson said he believed Auckland was now in a property bubble as bad as the sharemarket bubble of 1986.
Supply was just one part of the solution and could be too slow for this economic cycle.
"You can see a slowly unfolding scenario here, that by the time it [the supply] all comes on the world will have moved on and we could end up with a massive excess supply."
The immigration picture could change, or some other external factor could be the trigger for a crash. It was hard to say what the change catalyst would be, Goodson said.
It could be China, it could be wage inflation in the US but "something will happen and with asset prices where they are we're vulnerable when it does", he said.
Low interest rates worldwide are driving asset prices up and we are seeing that in both the property market and the stock market which is now hitting record highs almost daily.
The sharemarket was expensive but didn't feel like a bubble because it wasn't marked by the kind of euphoria that was present in 1986 and 1987 or the dot.com bubble, Goodson said.
"Last month 46 per cent of all new mortgages were to investors. How are they placed when there is suddenly an excess supply," Goodson said.
"That's the real danger, it's not so much in the sharemarket where prices are high but will probably stay high as long as interest rates are low, it's in the housing market where unquestionably it's an '86-style bubble."
Newland said he was now out of the residential property market because it was too expensive and no longer delivering decent rental yields.
He said he would like to see more medium-rise intensification and possibly a stamp duty to help curb the market.
Goodson said: "This bubble is pretty well advanced so, in terms of how we end it, we have to be careful what we wish for."
Newland agrees: "The bubble takes years to grow and the deflation can takes months, and it's all over."