Loans to investors fell to $1.15 billion in February - 35 percent down on a year earlier - following new house lending restrictions.

Rules introduced last October required property investors to have a 40 percent deposit before they could borrow the rest from a bank.

"There's been a marked reduction in the number of people purchasing investments, be it in Auckland or in the regions," said Loan Market director Bruce Patten.

Before the new rules, investors accounted for about 38 percent of lending. That fell to 26 percent last month.

In Auckland, their share fell from a recent peak of 48 percent to 38 percent.

First home buyers are still finding it tough as house prices continue to rise, albeit at a slower pace.

The silver lining was that fewer investors meant first time buyers had a better chance to snap up a place of their own.

Previous restrictions have had a limited shelf life before people found a way around them and their effectiveness usually diminished within a year.

The chief forecaster at Infometrics, Gareth Kiernan, said the nationwide hurdle on investors, and some acceptance that the days of runaway house prices may be over, could keep a lid on the market for longer this time round.

"Certainly looking at Auckland, [there is] some expectation that the market will remain more steady than it has in the last couple of years and possibly not seeing the same sort of rebound or pick up again once the effects of the LVR wane as it has in past times."

The Reserve Bank will hope so, though in public it remains sceptical.

Last week, governor Graeme Wheeler cast some doubt the housing market would cool much further.

Conditions in Auckland do not inspire confidence either.

Demand continues to outstrip supply, while the building response has stumbled due to funding constraints for property developers, and escalating costs for workers and materials have delayed projects.

Source: Radio NZ