The government is again warning first home buyers to be careful and not to take on too much debt.
Photo: RNZ / Cole Eastham-Farrelly
The latest caution comes as new Reserve Bank figures show the average loan for a first home has surged 43 percent in just the last two years.
In October 2014, the average loan for a first home was just over $270,000 - last month it hit $390,000.
Housing Minister Nick Smith said the figures didn't come as a surprise, given the rate at which house prices have been increasing.
But Dr Smith said while low interest rates had fuelled the housing market, they were likely to start rising.
"We have said that people do need to be cautious, that there is the prospect of interest rates going up, people need to be careful that they don't get themselves into levels of debt that they would be in difficultly if it went down that scenario."
"And that's where individuals need to make their own choices," Dr Smith said.
"I'm encouraged by the fact that there are pretty clear signs coming out of Auckland that the housing market is cooling."
During yesterday's Question Time at Parliament, Labour leader Andrew Little pressed Prime Minister John Key on the Reserve Bank's figures.
"Is he concerned that the average mortgage for a first home buyer is now 43 percent higher than just two years ago?" Mr Little asked.
"Well I saw the member's selective use of data this morning Mr Speaker, what I can say is that of course people will be borrowing more because house prices have risen," Mr Key responded.
"But the good news is they will be paying half the interest rates they were when Labour last left office."
But Green Party housing spokesperson Metiria Turei said the Reserve Bank's figures revealed just how tough it is for young people to own their own home.
"What this means is that under National first home buyers are either having to wait years and years and years - if ever - before they can buy a house, or get into ridiculous amounts of debt that they simply can't afford.
This is a disaster for young families who are struggling to buy their own home to provide some security."
Mrs Turei said New Zealand had become a country where even well educated young professionals couldn't afford to own a home because property prices were so high.
