The sheer unaffordability of housing in Auckland is the main thing keeping prices steady, according to ASB chief economist Nick Tuffley.
But building more houses will be key to improving conditions for first-home buyers, not banning foreign buyers, he says.
The bank's latest housing confidence survey, out Thursday, shows a slight increase in the number of people who think prices in the country's largest city are going to rise - up from a net 19 to 21 percent.
But most people think it's a bad time to buy in Auckland. Mr Tuffley says prices went up for years, but have now stalled.
"It's still a market where it looks like prices won't be going very far for a while - forwards or backwards," he told The AM Show on Thursday.
"They're pretty flat... population's still pouring into Auckland as well and they're not building, so those things are holding it up, but the affordability constraints are still pretty high."
While prices outside of Auckland rose 8.6 percent in the year to July to a median of $455,000, according to the Real Estate Institute of New Zealand (REINZ), the median Auckland price was down 0.1 percent from $836,000 to $835,000.
Growth in more affordable parts of the city such as Waitakere were offset by falls in pricey regions such as the North Shore and central city.
Mr Tuffley says there is still uncertainty around the new Government, almost a year after the election.
"People are still pretty cautious - we've still got tax policies to come through yet, we're starting to some of these housing policies like the foreign buyer[s ban] come through, so there's still that uncertainty - particularly from the investor side."
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He doubts the foreign buyer ban, passed by Parliament on Wednesday night, will have much impact.
"Only really at the margin. I think it's been a buyer pool that's been quite small. It might have been more significant and appeared more noticeable a few years ago. Right now, it doesn't seem to be one of the big drivers of the market. We've generally domestic investors are the single biggest buying category."
And their purchasing power has been reduced by the second round of loan-to-value restrictions imposed by the Reserve Bank, requiring most investors to have a 40 percent deposit.
"The investor restrictions started to level the game a bit. Since the easing of restrictions at the start of the year, we're actually seeing it's the first-home buyers that are benefitting from that extra headroom in that low-deposit space. It's a really encouraging sign," said Mr Tuffley, saying the tighter rules on investors made the biggest dent in Auckland.
In January, the Reserve Bank upped the amount of money a bank could loan to low-deposit buyers from 10 to 15 percent of all lending.
Canterbury is the only region of the country where most people think it's a good time to buy - optimism reaching its highest level since the 2011 earthquake.
Watch the full interview with Nick Tuffley above.
The AM Show with Duncan Garner, Amanda Gillies and Mark Richardson, weekdays 6-9am on RadioLIVE and streaming live to the rova app on Android and iPhone.