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The housing crisis has got worse but Kiwibank economist Jeremy Couchman says there are signs it will soon start improving.

Although the housing deficit has increased by nearly 30 percent, Couchman says slowing migration and a better performance from the building industry means we will soon see a turnaround.

The increased supply is unlikely to precipitate a drop in prices like it has in Australia.

Auckland house prices have dropped 5 percent from their peak and may fall further but Couchman says the market is fundamentally under-supplied.

Low interest rates that might be cut again in August will also support house prices.

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