In its latest report on New Zealand the IMF said there was some uncertainty though around the 15-25% estimate which was based on the OECDs house price to income ratio as at September last year, which did not take into account Statistics New Zealand's recent upward revision to household income.

Under the OECD model real house prices rose by 150% in the 15 years to 2007, the IMF said, making it one of the strongest house price increases among advanced countries, though since then house prices have fallen by more than 10%.

A new model developed recently that takes into account income, demographics and interest rates, suggests house prices in New Zealand are over-valued by 20-25%, the IMF said.

Yet another model that uses demographics, mortgage interest rates and the terms of trade instead of future income indicates house prices are over-valued by 15-20%.

However, that model is sensitive to terms of trade and interest rate movements. For example, a 10% fall in the terms of trade could result in an 8% fall in house prices over the medium term.

On residential rents, the OECDs price-to-rent ratio shows a much higher over-valuation of 43% relative to the past 20 years.

"However, the measures include Government subsidised rents which has pushed up the ratio over time as subsidised rents decreased, most notably in 2001," the IMF said.

Taking subsidised housing out of the equation, the rent over-valuation drops to around 15-27% when compared to historical averages.