Andy Haldane told an audience at the Trades Union Congress that Britain needed to build around 200,000 homes a year and its failure to do so was putting upward pressure on prices.
"There is a chronic and accumulated imbalance between demand and supply, and it is that which is sending skyward – and has sent skyward – house prices," he said.
Haldane also rejected the idea that foreign buyers were to blame for rising prices.
Separately he said now would be a good time for the government to borrow and invest in infrastructure given that the interest the government has to pay on its debt is so low.
The latest data from the Office for National Statistics shows that house prices rose 5.2 per cent year-on-year in August.