Hawke's Bay is not set to feel the "halo effect" of the Auckland housing boom says BNZ's chief economist Tony Alexander.
Speaking at a seminar held during the National Horticultural Field Day at the Hawke's Bay A&P Showgrounds in Hastings, Mr Alexander said when economic models don't work any longer what economists look at in order to make forecasts of where businesses will go are demographics.
"You look at demographics, you look at where people will go and you look to where infrastructure is going," he said.
"[So] I would confine the halo to Hamilton, Tauranga - a bit of Whangarei."
He said New Zealand's economic development over the next 100 years will be along the road between Hamilton and Auckland.
"People overseas know this and so they come into New Zealand and [say] 'right where are the motorways going in Auckland? Where are the new railway stations going? Where are things being improved?'.
"That is why I am saying Auckland, Hamilton all that bit in between."
He said Hawke's Bay would not take part in this expansion.
"You are not part of that very strongly linking into the wider definition of Auckland - and that is where businesses will tend to gravitate," Mr Alexander said.
The reason for this, he said, is the region will not get the population growth here in the Bay by way of people moving from Auckland.
Mr Alexander said while the region would get some people from Auckland and some from the next-tier cities of Tauranga and Hamilton, people in Auckland were downsizing.
"They are increasingly going from selling the $1.5 million house [and] going to an apartment," he said.
"80 per cent of the apartments being built in Auckland they are in the suburbs they are not in the CBD.
"The stock is going to suit people downsizing freeing up some cash there rather than here."
He said Hawke's Bay would have a catch-up period, however.
He attributed part of the rise in house prices around the country to simply a re-pricing to reflect structurally lower interest rates.
"One reason why the house prices have gone up so strongly is cause you can borrow at 4.5 per cent and the interest saving is discounted into the building price," he said.
"So Hawke's Bay prices will rise on that sort of factor same as everywhere else around the country."
He said he did not believe the region was going to be experiencing above national average growth in population over the next 10 years. He would make the same comment about Otago, Southland and Taranaki.
"But you will get a reasonable share of people going 'I have had enough of Auckland or Hamilton and I am going down there'," he said.
So if this is the case who is buying the houses?
"It is the locals who are driving the markets," Mr Alexander said.
"If you have been around as long as I have, and for me this is sort of my fifth housing cycle, you realise what happened now is we have reached the point of capitulation of investors.
He said people had held back from buying previously, thinking the market was going to drop further, and were now being driven to the housing market by a fear of missing out.
"So now your bottom of the pyramid people who didn't plan to be buying are now in the market buying," he said. "This is the last lot of buyers, this is the biggest lot of buyers, this is the most uninformed, undercapitalised, jittery group of buyers and at the moment they have to buy something and this is going to accelerate over the remainder of this year."