BNZ chief economist Tony Alexander says there are good reasons why house prices have risen.

The property boom will end in 12 to 18 months, BNZ chief economist Tony Alexander says.

Alexander believes house prices still have some way to run, but will then plateau rather than crash.

The regional housing boom, dubbed the "halo effect" from Auckland's hot market, is being driven by panic buying, sparked by an impression that Aucklanders are investing in their market, prompting local investors and first home buyers to dive in, he said.

In Wellington in particular, "people have given up on their view that prices would be falling away and now they're jumping in boots and all".

READ MORE:

* Auckland home owners who bought in past four years suffer in 40 per cent price fall

* I'm doing nothing wrong: young property investor

* PM sends signal Reserve Bank should extend restrictions on lending to curb house prices

* House prices climb $3K a week, rising at fastest rate since 2004

"These are the late cycle buyers. The market has capitulated, these are the bottom of the pyramid buyers."

Reserve Bank deputy governor Grant Spencer is expected outline possible measures to slow house prices in a speech on Thursday night.

Potential measures could include higher loan to value ratios (LVRs) for investors, either in Auckland or nationally, or debt-to-income ratios which link home loans to a multiple of the borrower's income.

Alexander expected the Reserve Bank and the Government to start making more noise about clamping down on investors and boosting housing supply.

But, he did not think a big increase in housing was really possible in Auckland, which was bogged down by lack of infrastructure money and a shortage of builders.

"There's nothing coming along that's going to radically boost house supply in the near future, but you have to have your expectations for supply in the next five years."

However, as migration slowly eased, and building consents began to rise, house prices would also come into line.

Alexander said the Government had seen voter discontent in the United States, United Kingdom and Australia, and could sense the "wind of change," so it would try harder to change people's expectations about housing as an investment.

"You can't suddenly stop the market, all you can do is set expectations."

Meanwhile, markets like Wellington were experiencing a "feeling of panic" as people worried they had missed out.

"The clever operators who have been through cycles know that this is where you sell off your high maintenance low yield stock to these panicked buyers.

"And so that to me is the first of the factors which will eventually cause the market to plateau. We have entered the last ranks of new buyers."

Tony Alexander's housing market predictions:

- An end to falling interest rate expectations. Adjustment to a new low interest rate environment over the six to nine months.

- Migration will ease, "nothing precipitous". In two to three years the net gain will reduce to between 25,000 and 30,000 from 68,000 now.

- Housing supply will rise slowly. National building consents will rise to 30,000 in a few months .

- The Reserve Bank to introduce a debt-to-income ratio, probably by the middle of next year.

Comments on this article have now closed