The Reserve Bank of New Zealand has warned a planned surge of new house building to address an over-valued housing market would take longer than the Government expected and may increase inflationary pressures.The bank also reiterated it wanted to see housing supply more balanced with demand before it lifted new restrictions on low deposit mortgage lending.Deputy Governor Grant Spencer delivered his third speech this year on New Zealand's fast-rising housing market on Tuesday, adding to two speeches and a newspaper opinion piece by Governor Graeme Wheeler explaining and defending the Reserve Bank's politically controversial speed limit on high loan to value ratio (LVR) loans.Spencer reiterated the speed limit was only temporary, but noted it would take longer than many think to solve supply shortages in New Zealand's biggest cities of Auckland and Christchurch. Auckland Council had estimated the city needed to build 13,000 homes each year to meet projected population growth over the next 30 years. The local and central Governments had agreed on an Auckland Housing Accord that aimed to free up land supply and fast-track building consents so 39,000 homes could be built over the next three years. Spencer noted the accord aimed to open up enough land for 9,000 homes over the year to March 2014, but so far land for just 6,000 houses had been opened up and the current annual consenting rate was around 5,600. "The accord targets are ambitious and it will take time for land to be developed and houses built," Spencer said. Spencer also said the Auckland Accord building plans would be implemented while 12,000 new homes were being built in Canterbury to replace those destroyed in the February 2011 earthquake."To achieve this, new dwelling construction would need to be 9 percent higher than at the height of the recent housing boom, even assuming no growth in home building through the rest of the country," he said."At the same time, a significant amount of repair work, infrastructure and commercial construction will be taking place in Canterbury. In reality, we expect the targeted house building in Auckland and Christchurch to occur over a longer period than three years."Even with a slower build than expected, Spencer expected the construction surge would create price and wage pressures that could spill over into wider inflation, putting pressure on interest rates and the exchange rate."In due course, we expect housing supply to catch up with demand, and for demand to be further moderated as interest rates return to more normal levels over the next couple of years," Spencer said.The Reserve Bank would look to lift the lending restrictions as the current imbalance between supply and demand was reduced."The indicators we will assess in this regard include house price inflation, mortgage approvals, credit growth and house sales," Spencer said."We will be looking for clear signs that excess demand pressures have substantially reduced and that a removal of the restrictions will not result in a return of such pressures."The full speech is here.