Immigration Minister Michael Woodhouse said the disproportionate number of migrants in Auckland was creating challenges to infrastructure.
"At the same time, business owners in other parts of New Zealand often struggle to find enough skilled workers to meet their demands," he said.
Statistics New Zealand's latest annual permanent and long-term migration figures showed a record net gain of 58,300 migrants in the year to June, nearly half of whom settled in Auckland.
The rate of house construction in the city was currently around 8000 homes a year.
Mr Key was unsure how many migrants would settle outside Auckland as a result of the policy. He warned that the changes would not relieve Auckland's residential property pressures.
"I think in reality Auckland is still a very attractive destination," he said.
"We're not making it harder to come to Auckland, we're making it more attractive for people to go around the regions.
"I don't think it will have a dramatic impact but I think, in the end, the way to resolve the Auckland housing issue is through supply."
Migrants who gained residency under the new points system would be required to live in the regions for at least a year - longer than the current requirement of three months.
Mr Woodhouse conceded that the Government could not force people to stay outside Auckland permanently.
"We can't capture and keep them there," he said.
But he said that he did not expect "a flood of people back north" once their minimum time had expired.
Changes
• Bonus points for residency applications raised from 10 points to 30 points for skilled migrants who settle outside Auckland.
• Bonus points raised from 20 points to 40 points for entrepreneurs planning to settle outside Auckland.
• Labour market test for migrants streamlined to give employers more certainty.
• 600 long-term migrants on temporary visas in the South Island given pathway to residence.
• New "global impact visa" to encourage young tech entrepreneurs.
