The property market is losing its strength as rising interest rates and stricter lending rules have resulted in house price growth falling to its lowest point in 18 months.
CoreLogic's House Price Index, which measures the changing value of property, rose 0.8 percent in February, taking the national average house price to $1.04 million.
It was a sharp drop on January's 2.1 percent growth rate.
CoreLogic head of research Nick Goodall said it was the lowest rate of growth since September 2020, which marked the start of an exceptional 18-month growth phase.
Despite the growth, analysis of very recent sales showed sentiment was rapidly changing in the market, CoreLogic said.
Recent lending data from the Reserve Bank had revealed a significant drop in mortgage activity, despite more properties coming to market.
This was due to the higher costs of credit as the RBNZ hiked interest rates to rein in inflation, tighter lending restrictions, and controversial changes to the Credit Contracts and Consumer Finance Act (CCCFA), Goodall said.
The latter has been in operation since December but has already drawn severe criticism for causing people with previously good credit records to be refused finance.
"Our expectation is the HPI will dip further over the coming months as continued rate hikes and tighter credit controls weigh on market conditions," Goodall said.
Looking ahead, the government's review of the CCCFA changes may see credit conditions loosen, but for now, the outcome remained uncertain, he said.
The slowdown in lending meant it was unlikely the Reserve Bank would introduce debt-to-income ratios this year.
The gradual reopening of the border meant tracking net migration over the coming months would be important for the property market, Goodall said.
Demand could fall further if the reports about an exodus of skilled workers relocating overseas came to fruition, he said.
Across the six main urban centres, house prices in Dunedin and Hamilton showed the greatest signs of weakness over February with prices falling 1 percent and 0.9 percent respectively.
Growth in Wellington eased, gaining just 0.4 percent over February.
Auckland saw the strongest lift in prices, rising 1.8 percent with the average property value now $1.5m.
It was closely followed by Christchurch (+1.1 percent) and Tauranga (+1 percent).
House prices fell in seven of the 15 regional centres CoreLogic tracks.