Property prices could sink in some parts of Christchurch as homes in areas prone to liquefaction require extensive work to offset the risk they will be destroyed in another earthquake.

The warning comes as house sales in the city plummet on the back of last month's earthquake, and an already subdued property market in the city.

University of Auckland business school senior property lecturer James Young said while it was almost impossible to predict the future shape of the market, history suggested certain submarkets fared better than others based on the perceived risk of future damage.

"It's not just about supply and demand, but the whole psychology around risk.

"Those areas that suffered in both quakes are now more risky in relation to rebuilding. This makes the land in high damage areas less desirable to many and the cost of construction higher because of those increased mitigation measures.

It would be those psychological elements that would determine how much, or if prices moved, he said.

Melanie Swallow of QV Valuations said she knew of one case where 12 - 15 per cent was wiped off the value of a property because of damage suffered in the last month's earthquake, while in other pockets of the city values were holding steady or increasing slightly.

However it was difficult to interpret how future valuations might look while there was limited activity in the market.

"At the moment in our office we haven't been given a task to value a home in one of the more affected areas. That's probably a reflection of that part of the market in that it's not ready to transact yet," she said.

Mark Beatson from valuation company Telfer Young said the behaviour of the market would be largely influenced by the stance taken by insurance companies, lending institutions and local and central government.

"Such leadership is critical to encouraging people to remain in, or be attracted to Christchurch, and underpin a healthy property market," he said.

Beatson questioned whether some of the rents achieved for office accommodation following the earthquake could be sustained given the "extraordinary market conditions" which prevailed at the time.

Meanwhile Young said residential rents were likely to increase in the short term due to a shortage of housing stock created by damaged properties and contractors moving into the city.

"Also, those who cannot move back into their homes and want to remain in Christchurch will need somewhere to live until their houses are rebuilt, further increasing demand for rented property.

"This is still the case in the Gulf Coast in the US, where rents are now on average of 50 per cent higher than they were when the hurricane hit," he said.

Property commentator Olly Newland said he expected the Christchurch property market would be a nervous one for a while yet.

"This is a long, long story and I think we will still be talking about it for two or three years. I can't see insurance companies paying out anything or people buying until the shaking stops."

"I think it's going to be a winter of discontent for the market."

- NZ HERALD ONLINE