Dominick Stephens said data from QV and REINZ confirmed the beginning of a trend.
He said the fall in sales was most noticeable in the cheaper end of the market and had hit all regions except Queenstown.
Stephens said the price increases of recent years had been primarily driven by low interest rates, which made houses more valuable to property investors.
“The investment value of a given property is sensitive to interest rates – the more cheaply an investor can borrow, the higher the price he/she can pay for a house while still realising a profit at a given level of rents. When interest rates fell sharply in 2012, our Investment Value model rose sharply. This was a valuable signal of house price inflation to come.”
But he said the sharp increase in interest rates seen in August had indicated a slowdown around the corner.
“Around the same time the RBNZ introduced new mortgage lending rules that restricted the availability of credit to some aspiring buyers, and resulted in very large increases in the mortgage rates available to others – another financial factor that pointed in the direction of an imminent market slowdown.”
He said the impact of the LVR rules had probably passed its peak.
“Banks have reduced lending to people with small down payments by more than enough to meet the RBNZ’s requirements, and can now afford to increase lending a bit. So the housing market slowdown is not necessarily going to become any more severe over the next couple of months – if anything, we might see a small tick up in market turnover.”
But while things might get easier for low-deposit borrowers, higher interest rates would be a drag on the market over 2014, he said.
“We expect floating mortgage rates will rise by about one percentage point this year, while fixed mortgage rates rise by a lesser increment. This will have the usual impacts – property investment will look less attractive, as will getting a mortgage instead of continuing to rent.”
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