This adds to the grim outlook portrayed in property mortgage insurer PMI’s mid-year report, released on Thursday, and Quotable Value’s monthly report, which is out tomorrow.

QV’s Blue Hancock said house prices were declining on a month-to-month basis, although annual figures had not quite caught up.

The PMI report said New Zealand house sales had hit a 10-year low and house prices could drop as much as 10 per cent over the coming year.

But King said more activity and good bargains were coming.

“If people have to sell because they have over-borrowed, or have invested but didn’t know what they were doing, you could see prices fall.”

Hancock said QV had noticed vendors pulling away from tender and auctions in recent months, and listing homes with words such as “desperate to sell” and “mortgagee sale”, attracting bargain-hunters and low offers.

“The advice is: be very careful on how you instruct your agent to market the property,” he said.

“It might not be in your best interest to put in ‘all offers accepted’ or ‘mortgagee sale’ or ‘vendor desperate to sell’ phrases.”

Martin Evans, president of the Property Investors’ Federation, said a greater number of lower-priced properties would come on the market about September or October when a lot of two-year mortgages came up for renewal.

People who bought properties in the past two years that were not returning a high-enough yield would soon be looking to sell, he said.

On the other hand, Hancock said a cut in interest rates and the official cash rate could come sooner than expected and it that would be interesting to see what happened when mortgages were renewed in September.

“If the interest rate reduces we may see a reinvigoration of what’s happening in the market place or a stabilising of it.”

Prices also depend on migration and world events, Hancock said.

Despite investment yields being down, the ANZ’s annual Property Investors Survey, released last week, showed most were still optimistic about the property market.

ANZ chief economist Cameron Bagrie said: “You look at what their expectations are and I do think they are a bit rich. They are looking for a pretty quick turnaround and that’s a bit of a stretch, given the dynamics the property market faces at the moment.”

One-third of investors surveyed predicted prices would fall over the coming year.

“The reality has sunk in, but people seem to think the market’s going to bounce back in three, four or five years,” said Bagrie. “People should be a little more realistic and circumspect.”