Sales activity has been subdued since the government introduced tougher tax treatment of property investment, as property values slipped back in June, according to QV Valuations data.
Property values were 5.2% higher than the same month in 2009, retreating from the year-on-year gain of 5.6% in May. That's the second time since March 2009 that the increase has lagged behind the previous month. Values are now 4.3% below their peak in late 2007.
"After we got closer to the peak, a lot of people are sitting on their hands" as they weigh up what to do next, said Glenda Whitehead, QV spokeswoman.
"We haven't had a rush of investors getting out of the market" with listings down and sales activity 20% below the long-term average, she said.
Whitehead said the housing market was probably indicative of the more downbeat mood among commentators on the wider economy, after recent data showed firms were less optimistic about the outlook of the country's economy.
The tax changes didn't seem to be changing behaviour too much, with activity largely unchanged from the lead-up to the government budget, and if people were to alter their behaviour, it would be over the next 12 months, Whitehead said.
"Buyers continue to be very cautious and selective in their purchasing decisions," Whitehead said.
"There are still sellers who have unrealistic price expectations in the face of present slow market conditions."
The data comes after Auckland's biggest real estate agent Barfoot & Thompson reported a 16% slump in sales last month, as winter deterred people from looking for new property. House prices are forecast to fall at an annual rate of 2% for the next two years, according to Westpac research, after the government clamped down tax treatment for property investment.
The national average sales price rose to $404,715 from $403,070, due to a change in the make-up of sales taking place, which QV said shows the unreliability of using sales prices to measure value.
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