Buyers have edge over sellers for now

ASB chief economist Nick Tuffley said there is a reasonable number of listings on the market, which has pushed the balance of supply in favour of buyers.

"In the short-term, there's potential for a very slight price decline with turnover remaining subdued" and this will help sway things on the side of buyers, Tuffley said.

Total residential sales inched down to 5,206 from 5,207 a month earlier, according to Real Estate Institute data. The volume of sales was around 1,000 fewer than the same month a year ago and the market has struggled to regain the momentum of 2007, in spite of record-low interest rates as households focus on paying down debt.

The number of median days to sell rose to 43 from 40 in April, and was up from 42 days in May last year.

The median sale price dropped 1.7% to $350,000 month-on-month and was up 3.7% from May 2009. The institute's housing price index, which was constructed with the help of the Reserve Bank to give a more accurate gauge of house prices, fell 1.4% to 3,210 in May, though it rose 0.7% in the three months through May and gained 2.3% from the same month a year ago.

The property market fell into a lull this year after the government flagged it would tighten loopholes around property investment tax and the central bank got closer to hiking interest rates.

Property values registered their first decline this year last month, according to QV data, after house prices clawed back much of their losses last year amid an inflow of new migrants and returning expatriates stoking demand for housing.

Still, Tuffley said he did not think buyers will have the upper hand for long, with the government's tax changes less onerous than expected and the Reserve Bank's quarter-point hike to 2.75% in the official cash rate likely to keep potential bidders on their toes when residential property starts a more sustainable recovery.

"We're not expecting dramatic weakness in the short-term," he said.

"Prices will gradually nudge up" in what is expected to be a slow recovery, he said.

The Auckland median price fell to $455,000 from $470,000 in April, though the number of sales increased to 1,887 from 1,768 month-on-month.

The Wellington median sale price declined to $385,000 from $390,000, with sales down to 548 from 623 in April.

The median sale price in Christchurch dropped to $277,500 from $304,775 in April, with sales falling to 492 from 511.

The Dunedin median price decreased to $241,250 in May from $248,000, and sales dropped to 154 from 175.