Home sales plummeted in January to their lowest level in nearly two decades, says the Real Estate Institute of New Zealand.

Institute President Peter McDonald says the total figure of 3,666 dwellings sold in January this year was the lowest monthly total since electronic records began in 1992 and was only the second time the total figure had dipped under 4,000.

The numbers, while officially released this morning, were inadverdently
on the institute's website earlier this week.

"Activity in the residential property market was quiet last month on the back of uncertainty over what actions the Government intended to take on the recently announced tax working group recommendations," he says.

"Hopefully the market will start to pick up now things are a bit clearer after the Prime Minister gave his opening speech to Parliament on Tuesday. He indicated the Government has ruled out proposals to introduce a land tax, comprehensive capital gains tax or new tax on residential investment properties."

The total value of residential sales, including sections, in New Zealand in January was $1.53 billion.

January's total of 3,666 was 40 fewer dwellings than were sold in January 2009, the first time total dwelling sales fell below 4,000 and 1291 down on December 2009.

ASB economist Jane Turner says the housing market is "starting to slow and becoming more balanced."

"Due to some uncertainty around tax policy until May the market is likely to remain subdued for some time."

Turner says today's numbers added further breathing room for the Reserve Bank when it came to looking at official interest rates.

"The pick up in house prices of the second half of last year was surprisingly strong and did present a risk of reigniting unsustainable credit growth and consumer spending, at a time when a focus on increasing savings was needed," she says.

"Fortunately for the Reserve Bank, the Government looks likely to step in and help even the playing field. Changes to the tax policy around housing will reduce the amount of work monetary policy needs to do to bring inflation pressures back under control."

Turner says she now expects the Reserve Bank will not lift the OCR until June, and by 25 basis points (0.25 percentage points.)

"The rise in bank funding costs has placed a wedge between the OCR and retail interest rates. This dynamic, combined with an economy more sensitive to interest rates increases, suggests small OCR hikes will have a powerful effect at keeping inflation pressures at bay."

The breakdown of the values of the properties was 87 for $1 million plus, 395 for $600,000 - $999,999,937 for $400,000 - $599,999 and 2247 under $400,000.

The median residential house price rose in 11 out of 12 districts last month compared to the same period the previous year.

The national median of $350,000 was up 7.7 per cent on the corresponding figure of $325,000 for January 2009, but was $10,000 down on the median price for December 2009.

"House values seem to be holding nicely at the moment though and it's becoming a more settled market as times goes by," McDonald says.

The largest gains were Otago, up 17.9 per cent to $247,500, followed by Taranaki up 12.5 per cent to $300,000 and Canterbury/Westland, also up 12.1 per cent to $319,500. Central Otago/Lakes was the only region to experience a drop in median prices, down 10.4 per cent to $410,000.

Auckland residential sales, including sections, accounted for $666 million of total sales in January. Canterbury/Westland and Waikato/Bay of Plenty were the next greatest value at $191m and $183m respectively with Wellington not far behind at $172m.

The national median for days to sell in January was 43, 16 fewer days than the corresponding period a year ago but 10 more days than in December 2009. Sales were quickest in Southland at 33 median days and in Auckland where the median days to sell was 36.