Certainly, activity fell in all but one region, Hawkes Bay, compared with November, according to the latest Real Estate Institute figures. Compared with December 2002, activity was up in all regions except Wellington and Nelson/Marlborough.

The national median house price dropped from $235,000 in November to $229,000 in December with Wellington’s median price plummeting from $262,000 to $240,500. That was still up on the $215,000 median price for Wellington in December 2002. The number of houses sold in Wellington dropped from 1,127 in November to 857 in December and that was also down on the 892 houses sold in the region in December 2002.

Nationally, sales fell from 10,722 in November to 8,703 in December.

Real Estate Institute president Graeme Woodley says the number of properties sold in Wellington for under $400,000 jumped from 79% of total sales in November to 85% in December.

"We don’t believe there has been any wholesale weakening in the housing market and anticipate that the January figures will show their traditional resurgence. The property market remains buoyant," Woodley says.

Prices rose in six of the 11 regions in December compared with November and fell in the other five. Compared with December 2002, the December prices were up in all 11 regions.

Nevertheless, Ulf Schoefisch, chief economist at Deutsche Bank says the annual rate of increase in house sales has come down from around 30% in the September quarter last year to about 10%.

"While the level of sales remained close to historic highs, the data over recent months seem to indicate a turning point – or at least a plateauing – of the housing cycle," he says.

Schoefishch isn’t the only one to see signs of a slowdown. Economics firm Infometrics says real estate agents and potential property buyers are in danger of overestimating the housing market’s strength.

The factors which drove house prices up in the last year are turning around, particularly net migration. In the six months ended November, the net rate of arrivals per month plunged from 3,650 to 1,020 in seasonally adjusted terms. That is sufficient to reduce population growth by one-third," Infometrics notes.

Rising mortgage rates this year are also likely to squeeze buyers out of the market, it says.

Reinforcing that view are the latest figures from AMP’s home affordability report which shows homes became nearly 6% less affordable in the December quarter. For 2003, affordability was down 7.6%.

"The record highs in house sales and median dwelling prices provides evidence that New Zealanders’ love affair with residential property has continued unabated," says AMP Financial Services managing director Ross Kent.

"However, there are plenty of warning signs that the current housing boom will soon end," he says. "There are also signs that rental yields are beginning to slip."

REINZ PROPERTY MARKET REPORT