Further tightening of Auckland housing investor restrictions and potentially a broadening of nationwide investor restrictions have become a possibility as tensions grow between Reserve Bank intentions.
The central bank will release its financial stability report on Wednesday.
At the time of the November report, risks had increased because of offshore volatility, weakened dairy cash flows and a housing market imbalance.
ASB senior economist Jane Turner said the Reserve Bank's concerns about Auckland's overvalued housing market were specifically focused on the values relative to incomes and the prevalence of investor purchases.
Overseas evidence suggested investors had a higher default rate in downturns.
The Reserve Bank was hopeful the new restrictions would dampen house price inflation pressures in Auckland.
"At first, the Auckland housing market appeared to slow. But, more recently, evidence points to renewed momentum in Auckland,'' Ms Turner said.
Regional housing markets had also gained momentum since November, she said.
Given those housing markets were considered "less overvalued'', and less vulnerable to a correction than Auckland, the Reserve Bank might be content to continue monitoring developments.
However, research had shown some of the increase in housing market activity in the regions had been led by Auckland investors.
ASB judged the Reserve Bank would not have enough data this week to be convinced the Auckland market needed further action taken against it right now, Ms Turner said.
But there was a growing risk in coming months the Reserve Bank would lift the Auckland deposit requirement from 30%.
If the central bank lifted the deposit requirement for Auckland, it was hard to believe it would leave the rest of the country untouched.
"The Auckland-focused restrictions are funnelling demand elsewhere in the country and added restrictions in Auckland would just compound that redirected demand.''
The Reserve Bank had been content to note price-to-income ratios were contained in the regions but the rechannelled demand was creating new issues, she said.
The outside demand risked pushing regional prices up to levels not fully justified by local economic conditions, and at risk of getting overstretched if Aucklanders' investment demand halted.
Some of the added borrowing for ex-Auckland purchases would be secured against Auckland properties and leverage against Auckland home equity would still be increasing - although perhaps not as much as if the borrowing was being channelled into further Auckland purchases, Ms Turner said.
Other financial stability risks included dairy prices remaining weak.
The Reserve Bank would remain concerned about the risks to the banking sector from weak cash flows for dairy farmers.
A key concern was the potential for weak farm prices - exacerbated by market illiquidity - forcing a rise in non-performing loans.
