The housing market appears to be hitting the pause button after a period of rapid growth.

The Real Estate Institute (REINZ) house price index, which measures the changing value of property in the market, rose 23.3 percent for the year ended December to 4235.

But for the first time in 20 months, the index decreased month-on-month, down 1 percent from November 2021, when the index hit 4281.

The seasonally adjusted national median house price is up 22 percent from December 2020 to $905,000.

But it is down 1.6 percent from November 2021, when the median price was $920,000. The volume sold year-on-year is also down 29.4 percent

REINZ chief executive Jen Baird said there were signs of deceleration in annual price growth compared to previous months, with tougher lending rules having an impact.

"While the market remains confident, the impact of rising interest rates, tighter lending criteria and changes to investor taxation restrictions are starting to shift dynamics.

"In particular, the amendment to the Credit Contract and Consumer Finance Act on 1 December 2021 - which requires stricter scrutiny of borrowers' financial health - seems to have had an immediate effect."

Kiwibank senior economist Jeremy Couchman said "cracks are certainly appearing" in the market after nearly two years of record growth.

"The various headwinds weighing on the housing market now look to be finally having a meaningful impact.

"The dynamics of the market have certainly changed in the last few months. The number of new property listings is trending higher. And as the market fails to absorb new listings the total available supply for sale has begun rising off record low levels."

Despite the latest figures pointing to the slowdown, Couchman ruled out a major housing market correction, instead forecasting the market would consolidate.

"Looking at the past 30 years, meaningful corrections typically occur when credit conditions tighten rapidly and we have an unemployment rate rising fast.

"We certainly have tightening credit conditions and rising mortgage rates. Yet we see the labour market as a source of strength for households, not weakness."

ASB Bank said the latest REINZ report "effectively confirmed" the housing boom was over.

Senior economist Mike Jones said the data validated forecasts of a sharp pull-back in housing demand in response to higher interest rates and tighter lending standards.

"We suspect housing activity might recover a little in coming months, so we're not getting too carried away with the December decline. What is clear though, is that supply and demand are now rapidly being brought back into balance."