Housing is becoming even less affordable and the government isn't ruling out taking over control of land supply.
The latest Demographia International survey shows the average price of a house in New Zealand during 2012 was 5.3 times the median household income, up from 5.2 in 2011.
Worldwide, only Hong Kong with an index of 13.5 and Australia with 5.6 were more expensive.
Finance Minister Bill English says Treasury forecasts show prices will continue to increase this year before levelling off.
"We're working with councils to ensure we get enough houses coming on to the market to meet the demand," he said on Tuesday.
"We're saying to the councils the government really wants to see results, and if they don't take action the government will."
Asked on Radio New Zealand whether the government would take control of land supply away from councils, Mr English said that would be a "dramatic" solution and the government didn't have a mandate for it.
"It's possible if the situation continues to get significantly worse," he said.
Mr English says councils must change their planning processes.
"We're looking at a chain of activity, from zoning land through to building consents - that just takes too long and has too much cost built into it."