Standard & Poor's, the global credit rating agency, has put eight local banks on notice over the rising risk of a housing bubble bursting in New Zealand.

New Zealand housing is already overvalued by about 25 per cent and if it continues to rise may force the Reserve Bank to hike interest rates, according to the IMF.

House prices are booming around New Zealand - with the average price of an Auckland city home rocketing to $735,692, up 12 per cent over the past year.

Auckland's top real estate agency has welcomed the Reserve Bank's moves to dampen the hot housing market but doesn't expect prices to suddenly drop.

The Reserve Bank has given strong signals that it intends to restrict mortgage lending at high loan-to-value ratios, to rein in credit growth and house price inflation.

Increasing pressure in a housing market where supply is failing to meet demand is posing a growing risk to our financial stability, says the Reserve Bank.