Average home prices in Auckland, currently sitting above $800,000, put the dream of home ownership out of reach for many residents, especially the young people. With average salaries stagnating at approximately $63,000 across seven top industries, the city could soon see itself with a dearth of teachers, nurses, and other socially valuable but economically disadvantaged residents.

At the time, BNZ economist Tony Alexander said that the tide will eventually turn. "There is an end game," he says. "It will come. It always does. It usually comes from rapidly rising interest rates. It won't this time. It will instead reflect a hammering from spreading, strengthening credit controls."

However, results may not be favourable overall if the economy's growth rate drops at the same time as government restraining measures begin to take hold. It could happen if the credit control spread is established and not pulled back "until the economy does tank and excesses in the housing market are cleared out," explains Alexander.

"Be in no doubt," he says. "Simply raising interest rates to target generalised inflation, and an over-heating housing market, is no longer workable for our central bank and others overseas."

Middle income New Zealanders are realising that their children cannot afford to buy a home of their own, and may feel that Prime Minister John Key is making only token gestures to rectify the situation.

Much focus has been placed lately on the number of foreign buyers investing in Auckland property, but a recent report from Land Information New Zealand suggests that the percentage of overseas investors buying property anywhere in New Zealand is only 3-5% of the total.

While Key, who campaigned on the promise of no new taxes, has tentatively mentioned the idea of an annual land tax to make foreign buyers think twice before investing here, with overall numbers of foreign buyers so low, that tax won’t likely make a significant difference. And with an election next year, Mr. Key can’t afford to have home prices drop by very much, anyway.

Whether or not foreign investors play a huge part in the runaway Auckland housing market, what is true is that New Zealand is one of the few countries willing to sell residential real estate to non-residents.

More Chinese buyers could look to New Zealand as leaders in Beijing loosen credit controls and relax regulations for residents wanting to invest internationally. In Australia, policies are being tightened on foreign buyers of its real estate, and banks across the Tasman are cutting lending to international buyers. Those buyers could increasingly look next door to New Zealand.

An additional complication to the overheating real estate market in Auckland is that the number of homes available to buy is at its lowest level in two years, according to the real estate agency Harcourts.

The Auckland Housing Accord is meant to release some Crown land and make it easier for developers to build new houses. A new subdivision at Hobsonville Point is expected to net 400 new homes, built by the Nga Maunga Whakahii o Kaipara Trust. Unfortunately, this number already falls below the predicted 1000 new properties needed to keep pace with the demand, and some local residents are pushing back against the idea of new development.

Up to 80% of the new properties, once built, will be sold at median prices somewhere around $500,000. But if wages don’t grow from the current levels, even “affordable” homes could be out of reach for most Auckland residents.