Auckland's housing market has become a giant Ponzi scheme, one economist says, as residents pay each other to get in and drive prices up and up.
Shamubeel Eaqub, NZIER principal economist, said this decade's housing market was like last decade's finance companies, being run as a high-risk money-go-round which could eventually end in misery.
"Essentially it's a Ponzi scheme because you need more and more new entrants to keep prices rising and that's exactly what's happening in the housing market. We've seen this in all kinds of businesses, for example finance companies were a classic. Who are the people buying the houses? We're paying higher and higher prices to each other," he said.
Eaqub now rents in Auckland, after returning from Wellington late last year, because he says it's cheaper. But says he will buy at some stage.
He and wife Selena are expecting their first baby next month. He has never ruled out buying, but says it has made little finance sense perhaps when he is in his 40s.