Rising property prices, particularly in Auckland and Christchurch, became a headache for the Reserve Bank last year, which was loathe to lift interest rates in response for fear of fuelling demand for an already elevated currency.
Instead, the central bank imposed restrictions in October on the level of low-equity mortgage lending banks could undertake as a means to reduce the level of riskier loans.
ASB Bank economist Daniel Smith said the weakness in January building consents had followed two "exceptionally strong months."
"The outlook for construction remains very strong and we still expect the OCR to rise from March," said Smith.
Much of the strength in building consents over November and December was concentrated in Auckland and Canterbury, he said.
"Auckland consents were around 20 per cent below the December level according to our seasonally-adjusted estimate, but were still 15 per cent above the levels seen October," said Smith.
Today's stats also show that non-residential construction demand was also improving, he said, underpinned by increased demand for new office buildings.
"This is in line with recent business surveys which show increased optimism amongst businesses towards investing in new commercial buildings. We expect higher business confidence will flow through to a continued improvement in non-residential construction demand over the coming year."
Westpac Bank economist Michael Gordon described it as "building consents came back down to earth in January".
"Even so, the decline was less than we expected, suggesting that the underlying trend in consents has genuinely picked up in recent months."
Gordon said he had been expecting a 15 per cent decline after the combined 20 per cent increase over November and December.
"Hence, today's outturn suggests there may have been a genuine lift in the pace of construction sector activity in recent months."
Today's figures show the value of non-residential building consents rose 29 per cent to $289 million in January from a year earlier, and were up an annual 8.9 per cent to $4.24 billion. The value of all building consents rose 26 per cent to $930 million in January from a year earlier, and was up 20 per cent to $12.27 billion.
with BusinessDesk