Foreign buyer ban to hurt house prices but the hit won't be a hard one

Auckland and Queenstown house prices will "clearly" be hurt by the upcoming foreign buyer ban, Westpac says.

But just how great an impact the ban will have when it comes into effect in the next few weeks was hard to tell, bank chief economist Dominick Stephens said.

He said some comparison could be made with Toronto in Canada where authorities imposed a stamp duty on foreign buyers that was so high it effectively worked like a ban.

"Toronto house prices fell around 5 per cent soon afterward," he said.

Yet, he also said Auckland and Queenstown prices were unlikely to be hit as hard because New Zealand's foreign buyer ban had "been watered down" and was "probably weaker than Toronto's stamp duty".

This was because New Zealand's ban included allowances for Australians and Singaporeans to still buy local homes and for foreigners to buy 60 per cent of the units on offer in major apartment complexes of 20 units or more.

Stephens said this could lead some foreign buyers - now blocked out of the housing market - to instead turn to purchasing new apartments.

The knock-on effect could then be to squeeze some locals out of the market for new apartments.

These impacts would be felt the most in the North Shore, Central City, Howick and Henderson-Massey districts in Auckland and the Queenstown Lakes District, Stephens said.

"These are the places in which foreign buyers account for more than 5 per cent of sales at present."

Overall, Westpac expects New Zealand house prices will fall modestly over the coming years, despite a brief "bump" in values around the start of the new year.

"This is because the New Zealand housing market faces a menagerie of negative forces, including tax changes, slowing population growth and the foreign buyer ban," Stephens said.