This latest fall follows on from last month's drop of 1.42 percent.

The biggest June house prices declines were seen in Manawatu and Wanganui - both down nearly 14 percent.

ASB economist Nick Tuffley said the slowdown in the housing market was continuing, judging by the price and days to sell performance. However, house sales had stabilized after their considerable tumble earlier in the year.

"We expect continued weakness in the housing market. To date sales turnover has borne the brunt of the adjustment. Going forward we would anticipate that weaker prices will pick up some of the adjustment process and that sales turnover will not weaken to the same extent."

Tuffley said that given the glut of listings on the market the median price "appears to be holding up comparatively well." "Mortgage rates dropped over May and June, which may have given the market a little support in the short term. However, there is still a considerable adjustment process to play out in the housing market through a combination of prices weakening further and some vendors taking their house off the market."

The Reserve Bank would, said Tuffley, continue to expect further weakness in the housing market, given that the demand/supply imbalance remains and household are coming under financial pressure from all fronts.

Today's data did not increase the chances of the Reserve Bank cutting the Official Cash Rate (OCR) on July 24, but neither were they "an impediment to doing so."

He still expected the Reserve Bank to wait until September to cut the OCR, "but it will be a close call". Pending retail sales and inflation numbers may make a difference to this assessment.

Deutsche Bank economist Darren Gibbs said that the figures showed that house prices were a little more resilient than he had expected based on anecdotal evidence.

"However, with buyers for the most part remaining on the sidelines (pending an expected decline in home prices and lower mortgage interest rates), we continue to expect that a sizeable decline in residential property prices will be recorded over coming months as sellers become more realistic about pricing in the face of ongoing increases in the number of property listings and long selling times."

Auckland and Wellington fared worse than the national average in the REINZ figures, with prices falling 2.24 percent and 2.26 percent respectively.

The Auckland median price fell from $447,500 to $435,000, with the metropolitan Auckland median falling from $451,000 to $440,000.

Source: New Zealand Herald