WELLINGTON, (Reuters) – Record levels of building activity in New Zealand are expected to help lower house prices which have reached an unsustainable level in the last year. Adrian Orr, Governor of Reserve Bank of New Zealand said Tuesday.

New Zealand is the least affordable country in OECD, and prices have soared by 30% over the past 12 months. This was due to a severe housing shortage, historically low rates of interest, and easy access to capital through the government’s stimulus spending.

Orr stated that the rise in property prices is largely due to insufficient housing supply responding to changing demand.

“Houses were scarce in times of high demand,” he stated at the Property Council of New Zealand Retail Conference.

“The reverse is now evolving – with housing building at record levels at a time that population growth is static,” he added.

Orr stated that the bank anticipates a easing of house prices in the medium-term due to the shifts in demand and supply dynamics.

“This means house prices would be moving back toward a more sustainable level – a level that can be explained by underlying economic fundamentals,” he added.

A number of measures taken by both the government and central banks have failed to reduce the country’s property bubble.

Housing crisis and economic effects of COVID-19 have led to an increase in homelessness, and created inequality. This is a problem for the Labour Party-led government headed by Prime Minister Jacinda ardern.

Orr stated that the central bank is well on its way to begin consulting about additional tools for debt servicing ratios, which will limit banks’ extreme lending.