The number of building consents for new homes has fallen due to a drop in new apartments.
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Official figures show permits for new dwellings fell a seasonally adjusted 9.6 percent in October from September, the largest decline in more than two-and-a-half years.
New apartment numbers totalled 78 last month, compared with 415 in September and 229 in October 2016.
"It appears soft apartment consent issuance in Wellington was a key driver of October's weakness," ASB senior economist Jane Turner said.
In the Auckland market, where demand remains strong, Statistics New Zealand said consents held up well particularly in Howick, Manukau, and North Shore.
"If Auckland can maintain the current monthly pace, it would finally start eating into its significant shortfall of housing, albeit, very gradually," Westpac senior economist Satish Ranchhod said.
More than 940 new homes were consented in Auckland in October. That more than offset declines in Wellington, which fell by two-thirds to 65, while the Bay of Plenty and Northland also declined.
On an annual basis, permits rose to near 13-year highs of 30,866.
"It does sound like a lot but in the context of record population growth, it's not meeting the lift that we need," Ms Turner said.
"Particularly in regions like Auckland and in Wellington, we are seeing that the lack of supply becoming a greater issue that it was last year."
Analysts point out a shortage of skilled tradespeople and raw materials, and tighter lending standards by banks have put a brake on activity.
Ms Turner warned consents may remain weak in the near term, as developers hold off for details of the Government's proposed Kiwibuild plan.