"It’s the direction of movement that’s really important here," Alexander says. "This is the worst annual rate of decline since October 2000 and probably gives a better picture of annual changes than the data for recent months which had their annual rates of change biased upward by SARS and so on hitting sales early last year."

As well, the average number of days it takes to sell a house has risen from 27 in May last year to 30 in May this year.

"This is the highest increase from a year earlier since July 2001 and merely confirms the easing nature of the housing market."

While the sales figures still show the national median house price is rising, Alexander argues the monthly figures should be treated with extreme caution in such a small economy and that a three month average provides a more accurate picture, particularly when looking at regional trends.

Immigration, a key driver of the housing market, is getting worse than forecast. Forecasts have been for immigration to fall from 35,000 last year to 20,000 this year, however Alexander says "we are headed for something much lower."

He estimates net migration will show a gain closer to 9,000 than 20,000 this year and that by the middle of 2005 it is highly probable it will have fallen to zero.

Alexander hasn’t made any forecasts further out, but notes that immigration flows have turned fast in the past. For example, while there was a net gain of 35,000 people in the year ended July 2002, in the previous 12 months there was a net outflow of 6,760 people.