The Canterbury region suffered another major aftershock this morning, causing further damage, and the state of emergency was extended for another week.
Mr Key, along with other government ministers, were taken to the hard-hit rural areas outside Christchurch, including Kaiapoi and Selwyn, where they were shown houses which had crumbled or been ripped from their foundations, as well as extensive damage to farms.
Speaking to the media outside a devastated church in Hororata, 56km west of Christchurch, Mr Key said the extent of the destruction throughout the region was clear.
"We always knew things were bad, but I think it shows you how big the rebuild job will be and also what the aftershocks are doing."
Aftershocks have rattled the city since the 7.1-magnitude quake struck early on Saturday, causing further damage to already-fragile buildings.
"The first thing we've got to do is get the region stabilised and once we have done that we can really start the rebuild job, because, unfortunately, some work that had been completed is having to go back and be redone now," Mr Key said.
Having had a closer look at the damage, Mr Key said he had a sense the rebuilding would cost more than originally estimated.
"Unfortunately, what you can see above the ground is only a portion of the problem," he said.
"As someone described the other day, it's a bit like an iceberg and what sits beneath the surface is where some real damage is taking place."
The situation for those who had lost uninsured homes in the quake was difficult.
"There may be ways through that. Internationally, it's been dealt with in other countries.
"Obviously, our big concern is that we don't want to send the wrong message. New Zealanders have to take insurance, both contents insurance and home insurance, to make sure they are covered in a situation like this."
Civil Defence officials announced the decision to extend the state of emergency for another seven days shortly after the 5.1 magnitude aftershock just before 8am today, but said it would have been extended anyway.
The aftershock was originally described as being of 6.1 magnitude, but downgraded shortly afterwards. Because it was relatively shallow, at 6km depth, and centred just 10km southeast of Christchurch it was felt as the strongest aftershock in the city since Saturday's 7.1 earthquake.
Civil Defence director John Hamilton said some inspected buildings would require re-assessment.
Lyttelton Tunnel was closed while cracks were inspected, but it was later re-opened when the New Zealand Transport Agency decided it was structurally safe and sound.
Christchurch Mayor Bob Parker said the gut-wrenching intensity of the latest quake reduced many emergency workers to tears and led to the evacuation of the Civil Defence offices.
But he said this afternoon the city was coping "amazingly well", while reiterating that people should talk to each other for support.
"People need help to unload that internal pressure," he said.
He has spoken to the Dean of Christchurch, the Very Rev Peter Beck, about getting church halls around the city open and offering people a cup of tea and a place to talk. Some of this was already happening.
"We need to be talking as a community. That is one of the most healing things we can do for each other," he told a midday media conference at the civil defence headquarters at the Christchurch Art Gallery.
There were continuous offers of help from volunteers. Groups wanting to volunteer should call the council on 941-8999 so that volunteer efforts could be co-ordinated.
Electriciy supplier Orion said all power had been restored to those customers who lost supply due to the 7.49am aftershock.
It estimated there were several hundred customers without power but the number was declining and the company hoped to have it restored to all by the end of the week.
Householders still without power should call Orion on 03 3639898.
