New Zealand's housing market could slow down as home buyers face the "big squeeze" - rising inflation, interest rates and rents, along with greater difficulties in getting a bank loan.
Prospective buyers who are already dealing with house price rises of 30 per cent in the last year are now also paying more to fill their car, shop at the supermarket, and save for a larger deposit.
Rising costs coupled with tougher bank lending and deposit size restrictions meant some agents were already reporting fewer buyers, and those who were left looking were getting desperate, they said.
One mortgage broker in South Auckland said people who might have saved hard for a 10 per cent deposit were resorting to non-bank lenders to loan them an 80 per cent mortgage, with that lender then topping them up with a personal loan.
The interest rate charged was much higher than a bank loan, but was still cheaper than renting, he said.
Another agent said some sellers who had agreed to very long settlements with developers who were offering huge sums last year were now getting caught out because developers could no longer get the funding.
People who were unable to buy in cities were heading into the regions, inflating prices there. One expert noted that state house waiting lists were rising the fastest in provincial areas.
Infometrics chief forecaster Gareth Kiernan said inflation had risen much faster than expected, hitting 6 per cent rather than the 2.5 to 3 per cent predicted this time last year.
"Pushing up to 4 per cent or 5 per cent felt like a pretty extreme scenario, let alone pushing up to the 6 per cent plus that we might be seeing as well. It's almost like the models can't cope with what's being thrown at them, really."
Interest rates had also risen faster than expected.
ASB senior economist Nick Tuffley said inflation was outstripping wage growth, at least in the short term, which meant people's purchasing power was being eroded by the cost of living faster than incomes going up.
He said the housing cycle was definitely turning, with prices likely to fall slightly this year and further interest rate rises likely.
Independent economist Tony Alexander said reality checks were on the way for various sectors of the market and that first home buyers also had possible debt-to-income ratios to look out for if the Reserve Bank brought those in.
Investors will be hit with tax changes in April which affect their ability to deduct the interest payments on their properties and therefore limit their cash flow.
Limited cash flows for investors meant upward pressure on rents, and Alexander thought an acceleration of rent rises would come.
"That's a vicious cycle for first home buyers trying to save a deposit, along with inflation, higher interest rates and more expensive homes over the last two years," he said.