New Zealand’s vexing problem of housing bothers all. There is skewed and prices are skyrocketing. As a result, many first time buyers are suffering as they are priced out and investors with profit motives take an upper hand in the market.

But, there are too many views on remedying it. One school says supply side solutions are needed to cool off the red-hot housing market, while another section wants speculators to be discouraged for ensuring a level playing field by applying harder taxation on windfall gains from property sale.

Deputy Prime Minister Bill English is the strongest votary of supply side reforms to address the housing crisis. English told CNBC that to mitigate the housing crisis, he sees no scope in clamping capital gains tax despite the central bank batting for it.

Bubble Feared

Property markets across major cities in New Zealand are steadily climbing, triggering fears of a sharp correction. Sales volume in March 2015 jumped to an eight-year high, with median prices in Auckland soaring 13 percent on year, far above the national average of 8 percent, according to the Real Estate Institute of New Zealand.

Though some analysts say New Zealand is one of the few advanced economies that have not experienced a major price correction in the past 45 years, recent trends have prompted the Reserve Bank of New Zealand to raise an alarm and warning. Recently, its deputy governor Grant Spencer made it clear, "we would like to see fresh consideration of possible policy measures to address the tax-preferred status of housing especially investor related housing." It was a clear reference to the need to clamp capital gains tax on the sale of investment properties on which many economists also agree.

No Barriers To Supply

However, Bill English, who also holds the finance portfolio, told CNBC that he believes increasing housing supply as the way to go than imposing more tax on the sector. "We just need more houses on the ground faster to deal with the inflows from migration and the positive attitudes of many New Zealand households in a world of lower interest rates," English added and said the government is going through a long and complicated process to improve supply.

In Contrast, Reserve Bank believes that supply-side solutions are risky as there is a long gestation period and it may take a number of years to eliminate the housing shortage. Waiting that long will be fraught with risks. The apex bank in a report noted that rising house price inflation, particularly in Auckland, represents a risk to financial and economic stability. Longer the demand, further will be the trend of prices departing from their underlying fundamental determinants to create a potential for a disruptive correction. Commenting on Auckland's ballooning prices, the minister said it has more to do with urban planning that seeks to pack cities. He said Auckland supports his case for a long-term fix of building more houses.

Rights Body’s Plea

Meanwhile, New Zealand's human rights watchdog called for “drastic action” to tackle the problems in housing. Chief human rights commissioner David Rutherford said all political parties should sit together and make a cross-party accord to address the "very serious" issues to ensure adequate housing in the country.

Rutherford said housing is a human rights issue and there is a binding legal obligation on the state to fulfil it. It falls upon the Government to protect this right, by devising appropriate solutions, he said.

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