Weak housing market figures have some questioning whether the Reserve Bank has applied the brakes too hard with its restrictions on low loan-to-value (LVR) ratio mortgages.
The latest Real Estate Institute of New Zealand figures show a sharp drop in house sales, falling prices and a big increase in the average time it takes to sell a house.
Institute chief executive Helen O'Sullivan said the picture was flat or even falling in areas outside of Auckland and Canterbury.
"There is a lot of talk about house prices rising, and I think it's important to note that house prices are rising in Auckland and Christchurch," Ms O'Sullivan said.
"Outside of those areas, house prices are flat to, in some cases, slightly negative. So for those regions, particularly for vendors and purchasers in those regions, there's a real conflict between prices rising and what's actually happening in their areas."
Ms O'Sullivan said it was not so much the rise in interest rates which was affecting the market but uncertainty about how much higher rates could go.
"Feedback again in the regions does suggest that LVR restrictions are having a part to play in those parts of the country, she said.
"But I think across the board, (not only) the increase in interest rates but the foreshadowing of interest rate rises to come is definitely giving people pause for thought.
"This time last year, rates were low and expected to stay low for some time. While rates are still relatively low compared to the long-term averages, it's that expectation that they will rise which puts a different complexion on things."
It was possible the Reserve Bank was risking slowing the housing market too much, Ms O'Sullivan said. The LVR restrictions, in particular, had been touted as a way of slowing demand until supply caught up but the reality was that supply was not an immutable thing, she said.
"Supply won't come to market unless the demand is there for it to meet and there is the possibility, I suppose, that you can slow down demand too much such that supply sits back and says 'well perhaps there's not such a demand here'.
"So it's a really delicate balancing act, I think."
While most economists are reading nothing too untoward in the numbers, some acknowledge there are signs of fragility.
New Zealand Institute of Economic Research (NZIER) chief economist Shamubeel Eaqub said the housing market figures were yet more evidence rising interest rates were biting.
"Right now, the expectation is the Reserve Bank will continue to tighten. That will slow the economy and moderate the impact, particularly for the housing market.
"The implications for New Zealand, particularly for regional New Zealand, where house prices are not rising very much, is that higher interest rates will make it much more difficult for those markets to perform well."
The Reserve Bank was meeting later this month and had to decide when to pause their interest rate rises, Mr Eaqub said.
It had given a strong signal it wanted to raise interest rates at least one more time but the NZIER believed the time was right for the Reserve Bank to pause and reassess the strength of the economy before there were any more moves, he said.