Auckland house sales slumped by 20 per cent last month as the effects of the Government's ban on foreign buyers hit the market, a major bank says.
The ban came into effect in October with the aim of preventing wealthy overseas buyers from competing for homes with locals.
But while most pundits had been unsure how great an impact it would have, Westpac chief economist Dominick Stephens said its effects were being felt immediately.
He said December was one of the lowest sales months in Auckland in recent years, while the Real Estate Institute of NZ said house sales across the country fell to their lowest levels in seven years.
Evidence "the foreign buyer ban's fingerprints" were behind the slump came from the fact the greatest drop off in sales happened in Auckland, where foreign buyers had earlier been most active, Stephens said.
"The impact of the foreign buyer ban has really shone through in the latest housing market data," Stephens wrote in his January propety market report.
"Housing market turnover shot higher in October - just before the ban came into force - but has subsequently tanked."
His comments come as speculation mounts Auckland and New Zealand house prices may follow those across the ditch in Sydney and Melbourne and take a drop.
But while REINZ data showed showed there was a 13 per cent annual fall in the number of houses sold, from 6,117 in December 2017 to 5,330 last month, prices have remained steady.
New Zealand's national median house sale price rose 1.5 per cent in December, compared to a year earlier, to reach $560,000, while Auckland prices rose 0.2 per cent to $862,000.
Nick Goodall, head of research for analysts CoreLogic, agreed the foreign buyer ban had hit Auckland's housing market, but said it was less likely to have a lasting impact.
Evidence for this came from that fact that combined houses sales for the last three months of 2018 did not drop off as much when compared to combined sales in the last quarter of 2017.
He said this showed foreign buyers had rushed to buy homes before the ban came into effect in October, and, in doing so, brought forward purchases that would otherwise have taken place later in the year.
This was why December's sales figure had been especially low.
The Government's Associate Finance Minister David Parker said he was pleased to see the ban was having an effect, especially as it had been panned by many in the real estate industry.
"The Real Estate Institute had said it would make no difference, but analysts now say it has," he said.
However, Parker said the ban was also "just part of the picture and only one of many factors influencing the market".
Other factors also included nervousness brought about by the recent softness in Australian house prices.
"House prices in places like Auckland and Queenstown remain expensive for first home buyers," he said.
National's Housing spokeswoman Judith Collins was critical of the ban, saying it had led to less investment being available to help finance the construction of new homes and apartments.
"The foreign buyers ban has been directly responsible for the stalling, and stopping, of apartments blocks being built," she said.
"This has been recognised by the Government as it was forced to give an exemption for foreign buyers to buy new apartments, but then require them to sell them again.
"The whole thing has been a buggars' muddle."
For his part, Westpac's Stephens said it was unclear whether the foreign buyer ban would lead to a drop in Auckland house prices.
The ban's dampening effect on prices could be offset by low interest rates and a loosening of lending restrictions governing how much money banks could lend to borrowers, he said.
However "a drop in house sales is usually a good indication that house prices are about to weaken, so there is a risk that Auckland house prices could start falling again", he said.