'No housing shortage'

There is no housing shortage, even though house prices have been rising, the New Zealand Institute of Economic Research says. But there is potential for a shortage in coming years if home building does not lift beyond current forecasts.

Principal economist Shamubeel Eaqub said a recent rise in house prices appeared to reflect a mismatch in the real estate market, with not enough homes for sale compared to demand.

"If the mismatch was a physical imbalance between demand and supply we would expect to see rents rise rapidly. This has not been happening in the New Zealand market," he said.

Rent bond data shows rents have been dropping. If home building does not lift, rent will start to rise. But excess demand would initially be managed by households increasing in size.

Recent house price, house sales and building consents data suggest the cycle is turning up, although there is considerable uncertainty around the sustainability of the recovery.