PHOTO: Housing crisis. The AM Show/Getty

The growing unaffordability of housing is expected to take centre stage in the Reserve Bank‘s (RBNZ) next report on the economy, out Wednesday.

Every six months the central bank publishes its Financial Stability Report, probing the “soundness and efficiency of the New Zealand financial system”. The previous report, published in May, saw the RBNZ “rattle the cage” over house prices, economist Cameron Bagrie told The AM Show on Tuesday, as they moved into an “unsustainable zone”.

“The August Monetary Policy Statement came out point blank and said house prices were on an unsustainable trajectory, the Governor appeared before the Finance and Expenditure Committee and said the same. I think this document will up the ante.”

Fergs Coffee

The median house price in October was $795,000 according to the Real Estate Institute of NZ (REINZ), dipping from September’s all-time high of $850,000. Despite the slight easing, prices in the year to October had risen more than 30 percent – more than a third outside of Auckland.

“When you see a 30 percent movement in house prices in 12 months you’ve got to raise your eyebrows in regard to what the trajectory is going to be like in the next 12-24 months,” said Bagrie.

“House prices have continued to move up, but now we’ve got inflation turning up on our doorstep and interest rates are moving up, so a different trajectory I think for the housing market over the next sort of two-three years.”

The official cash rate (OCR) rose for the first time in seven years in October. With banks following suit and upping mortgage rates, inflation rising and the RBNZ tightening its lending restrictions, Bagrie said regulators and banks are “stepping up to the plate” to rein things in before a crash becomes inevitable.