Only 8 per cent of Aucklanders think it is a good time to buy a house, compared with 33 per cent of people in the rest of the North Island, says a nationwide housing confidence study.
Confidence has fallen steadily in the city this year - by 4 per cent in each of the past two quarters - while the rest of the country has been showing increased confidence.
But economists say a lack of housing and low interest rates could drive nationwide house prices up by another 4 per cent next year.
The ACNielsen survey of 2650 people throughout country, commissioned by the ASB Bank, showed confidence in earthquake-stricken Christchurch was even lower in the three months to October, with 1 per cent saying it was a good time to buy.
A third of people in the North Island, not including Auckland, said it was a good time to buy - the same figure as the previous period - while nationwide, housing confidence had crept up by one point to 23 per cent.
Real Estate Institute chief executive Helen O'Sullivan said rising property prices in Auckland and unemployment figures would be giving potential buyers cause for concern.
But buyers shouldn't be discouraged, O'Sullivan said.
"The time to buy a house is the time that works for you. Market conditions shouldn't be the big driver for you. Obviously market conditions are going to set what you can buy, when you're ready to buy but really the decision about buying a house has to be based on your own financial circumstances and the reasons why you're buying a house.
"I think it's really important not to get caught up in hype about the market, to just buy on the basis of the fundamentals - Why are you buying it? Can you afford it?"
ASB chief economist Nick Tuffley said the figures reflected the tight conditions in the Auckland market, where the average house price is $530,000.
"Levels of new listings and housing inventory have remained low in the region, and clearly that is making it difficult from a buyer's perspective.
"Housing demand is unlikely to drop off, with intensifying expectation that interest rates will remain at low levels."
More than 40 per cent of respondents said they expected interest rates to remain on hold over the next 12 months - the highest proportion since 1999.
"The broadening belief that interest rates will remain low could further fuel interest in entering the market," Tuffley said. He expected the state of the housing market to rule out interest rate cuts in the near future.
"Supply constraints and the low interest rate environment should drive further growth in house prices of around 4 per cent next year on a nationwide basis."
Price expectations were high throughout the country, with 61 per cent of people in Auckland believing house prices will increase over the next 12 months.
Fifty-six per cent of people nationwide expected them to increase.
"Price expectations remain highest in Auckland and Canterbury where supply is tightest," Tuffley said.
"However, housing confidence outside of the two main centres is climbing suggesting that market buoyancy is spreading throughout the regions."