The Reserve Bank's deputy governor says more houses need to be built, but in the meantime demand for housing needs to be held in check.
Grant Spencer says the government and local council targets for building houses in Christchurch and Auckland are very ambitious.
He says getting near the three-year building targets in those two cities, where house price inflation has been rampant, will require a major effort.
Mr Spencer says given the relatively slow response to increasing the supply of houses, it does not make sense to let housing demand fuelled by lending get too far out in front.
He says the central bank's restrictions on providing mortgages to people with small deposits, which came into effect on 1 October, are aimed at moderating house price inflation by reducing demand.
Mr Spencer says New Zealand house prices are still likely to remain high by most measures.
He says the lending restrictions are intended to reduce the risks of escalating house prices harming the nation's financial stability by reducing the risks to banks' balance sheets.
