Fresh evidence of a cooling housing market has come in a report predicting growth in property values could soon slip back to single figures.
The latest report from Quotable Value, made public today, cites clear signs the real estate boom is slowing, with dwindling sales and flattening prices in the main centres.
The Real Estate Institute reported last week that the median house price had fallen $5000 to $345,000 between May and July, and July sales were the lowest for that month since 2001.
Quotable Value spokesman Blue Hancock said its latest figures suggested that while some provincial towns were still experiencing strong growth, prices in the major cities were plateauing.
"If the spring market doesn't provide a surge, then we would expect to see annual growth in property values dropping back to single figures in coming months."
However, nationwide, residential property values for the three months ending July were up 12.7 per cent from the same period last year - the fastest rate of increase in 15 months. The average sale price was $381,298, up from $378,672 in June.
Mr Hancock said because the number of buyers had fallen along with the number of houses for sale, prices were not being pushed down significantly. A strong economy had continued to drive the market but the average salary and house prices were now dramatically "out of kilter".
"All the signals are there for a market slowdown, there's no doubt about that. We're predicting it'll ease back, rather than the bubble will burst. I don't think there's going to be a major slump."
The Reserve Bank has raised the official cash rate four times this year in an effort to control inflation by curbing the buoyant housing market.
Big banks are now charging 10.55 per cent on floating mortgages, while two-year fixed rates are 9.25 per cent.
Max Meyers, of QV Valuations, said the effect of higher interest rates had not yet been seen in the Wellington market, but a slowdown was expected later in the year when a large number of mortgages would come up for renewal.
Property values in the region rose 16.3 per cent from the July quarter last year - the highest for the past two years - and the average sale price was $438,406. Upper Hutt led the region with 20.4 per cent annual growth, while Wellington City had the lowest rise at 14.7 per cent.
Wellington home owners John and Lucy Forsyth, who are selling their Rangoon Heights house, remain upbeat. Their first open home yesterday attracted more than 20 people.
Mr Forsyth said there had been many rumoured slowdowns that hadn't eventuated.
Massey University professor of property studies Bob Hargreaves said the market's mood seemed to have turned. "Interest rates are going up and there are a lot more stories around about mortgage stress."
Falling sales volumes were the first sign of a slowdown and that was now happening, he said.