Former National Party leader Don Brash has backed calls for a significant drop in Auckland house prices, saying they may have to fall by as much as 60 per cent - and politicians who won't admit that are "dishonest".

Brash's comments come after former Reserve Bank chairman Arthur Grimes suggested a 40 per cent drop in house prices was needed to tackle housing affordability.

Brash, Reserve Bank governor from 1988 to 2002, said house prices in Auckland and other parts of New Zealand where "just wildly out of whack".

While cities with affordable housing had median house prices three times the median household income, in Auckland the average house was 10 times the average income, he said.

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"There are two ways of fixing that: one is having a very substantial fall in prices...or if you have no increase in house prices for about the next five decades - half a century, two generations - and incomes would gradually catch up.

"People who say they're in favour of affordable housing but don't want to admit the fact that the only way of achieving that is to see a big fall in house prices are frankly being dishonest."

While a fall would hurt some Kiwis, others were already hurting as a result of skyrocketing prices.

"When you say you want to get house prices affordable, is there any way to do that without creating mayhem? The answer has to be no, but mayhem is being created now."

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Prime Minister John Key has called the idea of a 40 per cent cut "crazy", while Labour leader Andrew Little said he didn't believe house prices needed to fall that much.

Brash said there was also a need to cut New Zealand's high level of immigrations, after the Reserve Bank called on the Government to consider its migration policy in light of demand for housing.

"That whole debate gets caught up with issues of racism and 'Are you really just anti-Asian?' and all that sort of stuff.

"It shouldn't be caught up in that at all in my view, we should look at the basic questions: a) what effect does it have on the economy, and b) what effect does it have on the housing market, and on both those grounds I would argue that we should be looking at a reduced level of non-citizen immigration."

While Kiwis choosing to return to New Zealand because of the strong economy were also leading to high demand for housing, but Brash said politicians needed to focus on migration they could control.