By 2010 Ireland's house prices had fallen 35 percent from 2007 levels.  A similar situation could develop here in New Zealand say some experts.

The same factors that plunged Ireland into its housing crisis last decade are now in play in New Zealand and could spark a big correction, says a leading Auckland fund manager.

Milford Asset Management executive director Brian Gaynor said the factors behind what had also happened in Greece and Spain showed the potential for a "devastating" situation in New Zealand.

"I think of the Irish example and the similarities which happened in Ireland [compared] to here are huge. "The first thing is the role of the media," he said. "House prices are one of the sensations. The media played a huge role in Ireland in record prices - the best suburbs to buy, highlighting people who had bought and three months later made huge gains of 20 or 25 per cent or more.

"We also have a big migration inflow here which is exactly what happened in Ireland" he said. That had pushed the housing market up, but it could also be an influencing factor in a downturn. The potential for extensive new-house building is another worry.

New Zealanders now have about 73 per cent of their assets in real estate, drawing warnings from the International Monetary Fund, international credit rating agencies, Reserve Bank governor Graeme Wheeler and the Organisation for Economic Co-operation and Development. Deutsche Bank economists have listed New Zealand houses as the world's third-most-overvalued behind Canada and Belgium.

However, property experts say it's just another property cycle and prices may fall, then there will be a recover and boom phase before the cycle starts again.

Source: NZHerald