Rents and prices in Christchurch's previously booming housing market are flattening but a leading economist doubts Auckland will follow.
Shaumbeel Eaqub, NZIER principal economist, this week gave his quarterly economic update in Auckland and said Christchurch was being affected by a combination of circumstances.
"After the earthquakes, there was a massive shortage of housing and house prices and rents were rising rapidly - over 10 per cent a year for three years.
"And last year they barely grew and that's telling us we're now starting to build enough supply in terms of repairing homes and building new ones and it's possible that if we keep on building new houses, we might see house prices falling," he said of Christchurch.
Many people there had two places - repairing one while living in another and in many cases renting that second place.
But Eaqub said they were now rapidly reducing to one-house occupation.
But he says Auckland was unlikely to follow Christchurch's example because many other factors were in play in Auckland.
"We've got record net migration, very low mortgage rates, incredibly competitive banks and those are all the ingredients for probably more of an increase in house prices through 2015.
In the last year, Auckland house prices were up 16 per cent and we expect all of these pressures to build up house prices even more."
The Reserve Bank could not raise interest rates because that would hurt other parts of New Zealand but other macro-prudential tools could be used, particularly limiting borrowing compared to incomes.
Eaqub is one of Auckland's most vocal advocates for rental housing, returning from Wellington to Auckland later last year to establish an NZIER office here and not buying a house.
He says he and wife Selena Eaqub not only rent for lifestyle reasons but also because it makes little economic sense to buy now.
"The valuation in housing is so expensive that the risk of a downturn over the next 5 to 10 years is much higher than big increases," he says.
Eaqub also talked about New Zealanders' more cautious approach to debt, patterns in retail spending and the drought's effect on the economy.