Housing confidence continues to fall as New Zealanders see now as a bad time to buy, the latest ASB housing confidence survey shows.
Released this morning, the survey identified, as expected, housing pressures were the most intense in Auckland and Christchurch.
Elsewhere, home buyers were more relaxed.
In Auckland, a net -20% regarded now as a good time to buy a house, 60% believed house prices would increase in the next 12 months and 49% thought interest rates would increase.
In Canterbury, a net -12% believed it was a good time to buy, 60% thought house prices would rise and 53% said interest rates would increase.
The rest of the South Island was a bit more positive.
A net 10% of people surveyed believed it was a good time to buy, 49% believed house prices would rise and 55% thought interest rates would increase.
The New Zealand total was a net -5% believing it was a good time to buy a house, compared with 0% in July.
ASB chief economist Nick Tuffley said price expectations remained unchanged in the three months to October from the previous quarter.
''House-price expectations have remained steady around current levels over the past year, with price expectations the highest in Auckland and Canterbury - where the market is the tightest.''
The Reserve Bank's high loan-to-value (LVR) restrictions came into force on October 1.
The ASB monthly results showed a slight dip in house-price expectations in October, but the magnitude of decline was within the range of typical monthly volatility in the survey.
As a result, Mr Tuffley was reluctant to make a strong conclusion from the movement.
A breakdown of the net quarterly figure on house prices showed 62% expected higher prices and only 6% expected prices to fall, the difference being the net 56%; 18% expected the same; 15% did not know.
Interest-rate expectations lifted over the three months, with a net 52% expecting interest rates to increase over the next 12 months compared with a net 39% three months ago.
Mr Tuffley said the largest shift in the breakdown was an increase in the number expecting rates to go up - 55% compared with 44%.
A fall in the number expecting interest rates to remain unchanged - 20% from 27% - also contributed.
There was a slight North-South split on interest-rate expectations, with fewer in Auckland expecting higher interest rates - ''perhaps wishful thinking on account of their larger mortgages'' - while those in the South Island were more convinced of imminent rate hikes, he said.
The Auckland market remained tight but there were some tentative signs pressures might be stabilising in Canterbury, Mr Tuffley said.
The rate of house-price rise in Canterbury had slowed slightly and the median of days to sell had edged higher - an indication the market had become slightly less frantic.
However, the region's fundamental supply issues remained, with rents up 13% on year-ago levels, he said.
The stronger rental growth versus house-price growth might reflect new arrivals to Canterbury seeking to rent initially.
A similar dynamic was evident in Auckland in the wake of the earthquakes as some Cantabrians relocated, with Auckland rents lifting initially and housing market activity increasing six months later.
In Auckland, while new listings had started to rise, they remained at low levels compared with the previous housing boom. The increase in migration into Auckland had added to existing pressures.
''While housing market pressure remains intense, conditions are starting to subtly shift.''
The Reserve Bank's restrictions would lock a subset of buyers out of the housing market and reduce demand at the margin, Mr Tuffley said.
At the same time, the Reserve Bank's more hawkish monetary policy outlook had seen market expectations of rate increases rise and some fixed-term mortgage rates had also increased.
The combination of higher interest rates and increased construction of new housing should see some of the pressures gradually come out of the housing market, he said.
