Interest rates – How high is to high?

I'm living in New Zealand at the moment. I own a property which has risen 50% in value in less than a year. Houses in my area were on average are selling in 16 days over the past year. The only thing is that interest rates have risen heaps over the past year. The floating rate is sitting above 10%. The best rental yeilds I've seen are around 7.5%. Is it worth buying with interest rates this high, given that you will be at best running a loss of 2.5%? I'm not a big fan of negative gearing. Some people are saying that the market is going to crash others are saying its stable and rising.

thanks