The Government's amendment to the Overseas Investment Act, which will classify housing as "sensitive" will create over-supply and negatively impact prices, according to one real estate expert.
Regional director of Property Brokers, Paul Whitaker said New Zealand as a whole would be affected.
"It will be a merry-go-round; more cost to the landlords which means rent will increase, causing it to have an impact on the rental market - nobody wins.
"As far as prices go, we will see a flattening in the market due to their overseas policy.
"At the moment, the Hawke's Bay property market is very strong but we have definitely seen an increase in stock levels.
"It is the first sign that there is a quieting down in the property market. I don't think it is a direct effect though."
He said the change would "heavily affect Auckland".
"Houses will sell slowly and it will in turn mean that there will be an oversupply situation.
"It is a shame for people who have bought recently, as they will be most affected with losing equity.
"At the moment, they are alienating investors who are looking after most government tenants due to a lack of government housing."
Mr Whitaker said it was a "critical time for the new Government".
"I hope they are thinking this through; looking at everyone - buyers, landlords, interest rates and the economy."
Currently, Hawke's Bay was the only region in the North Island to have rising property listings year on year according to the latest figures from realestate.co.nz.
Head of marketing at realestate.co.nz, Vanessa Taylor said the rule change would curb demand but, in her view, not significantly.
Monthly, the website received more than a million unique browser sign-ins who were looking at properties.
"That equates to 15 per cent of visitors to the website from international IP addresses.
"Although, 7 per cent are from Australia and they are exempt from the building programme. That is 9 per cent international traffic effectively."
Ms Taylor said classifying housing as sensitive was "definitely not the silver bullet".
Tremain Real Estate managing director, Simon Tremain said there was a difference between non-residential international buyers versus international buyers seeking residences who will live in the properties.
He said there were many international buyers in the market.
"It will have very little effect. The non-residential international buyers market is limited anyway."
Mr Tremain believed Auckland would be the most impacted.
"There is always another buyer. Quite often, the international buyer drives the price up.
"The [Hawke's Bay] region is finally getting noticed."