A significant slowdown of house price growth is a "brave" and surprising prediction from the Government, local experts say.
While the Real Estate Institute of New Zealand predicts house prices to ease in the next year, it is not anticipating such a sharp drop.
The Treasury released its house pricegrowth expectations over the next four years in the Budget, which expected house price growth between 2021 and 2022 to be 0.9 per cent.
Because of the Government's latest housing announcements, prices were expected to rise at a slower pace of between 2.1 and 2.5 per cent to be roughly 16 per cent lower in 2025 than they would otherwise have been.
Those policies included a $3.8 billion housing infrastructure, an extension of the brightline test and the scrapping of the interest deductibility programme.
But Simon Anderson, managing director of the Realty Group Limited, which operates Eves and Bayleys, said he expected house price rises to flatten out rather than slow drastically.
"I can't see any dramatic change back to normal annual growth in the housing market," he said.
"While there's a shortage of listings, it's pretty hard to see any market changing while the demand is still there."
Davies said the interest deductibility policy would discourage investors and may result in fewer rental properties, but the extended brightline may keep them holding property investments longer.
"There was little to be encouraged about in the Budget for first homeowners and I have yet to see the Government deliver on housing.
"Spend on infrastructure in the regions may free up councils to take more initiatives and speed up consents. We can but hope."
The latest REINZ report showed median house prices had reached a record $937,500 in Tauranga and $630,000 in Rotorua.
REINZ acting chief executive Wendy Alexander said they were surprised the Government was forecasting such a significant slowdown of house price growth in the coming year.
"While REINZ has predicted easing of house prices in the next 12 months, we're not anticipating growth at such a low level.
"The last time New Zealand had a rate at or around 0.9 per cent was November 2015 when the annual increase was 0.2 per cent."
Alexander said house price growth was expected to slow as the reintroduction of the loan-to-value ratios started to have an effect, but at a rate between 3 and 5 per cent.
"It is our view that the lack of housing supply will continue to be an issue, particularly as we look to open the borders and we could see an uplift in migration into the country."