Property values increase as sales decline

House values fell 7.1% in the 12 months ended June 30, compared to an 8.1% decline in the period through April, according to QV Valuations, marking the third consecutive monthly improvement. The average sale price rose to $378,535 last month, from $371,555 in May.

"Historically low mortgage interest rates have led to improved optimism and encouraged more buyers back into the market," said spokeswoman Glenda Whitehead. "Potential sellers are holding back and waiting for values to increase again."

Last month, Reserve Bank Governor Alan Bollard warned the economy faces risks if signs of stabilisation in the housing market are taken as the portent of another boom, and spurs another cycle of borrowing and consumer spending. Rising net migration and a shortage of housing has stoked optimism of a revival in the property sector.

QV's Whitehead said concerns over job security, recent hikes in mortgage rates and tighter lending criteria could curb recent buyer enthusiasm.