Property values have continued to decline gradually over the past few months as market sentiment remains cautious, according to the August report by QV.

Property values have dropped 1.1 since March this year, after rising 4.3 per cent in the previous seven months.

As a result, values are now 3.1 per cent above the same time last year, and 5 per cent lower than the market peak of late 2007.

However, the average sales price increased slightly from $407,191 to $409,700 but this is because relatively few lower value properties are selling.

QV valuation manager Glenda Whitehead said little buyer demand and a considerable backlog of unsold property on the market are causing values to gradually drop.

"Although the number of new properties being added to this pool appears to have slowed as potential vendors choose to wait until the market begins to show signs of recover.

"Those with properties currently on the market now accept that they will take longer to sell, although they are not dramatically dropping their asking prices."

She said despite a drop in sales volume, it's still slightly above the same time in 2008, during the worst of the recession.

"There are early signs of a slight increase in activity as more people are assessing the market and considering their options. The housing market is usually more active in spring although the current economic climate suggest any upsurge this year will be modest. Short of any fundamental change in the market, values are expected to continue to slide slightly.

"The Christchurch earthquake is obviously going to have a major impact on the housing market in that area."

Auckland area values have been flat over recent months, but are 5.9 per cent above last year, while a month ago they were 6.9 per cent above last year.

Values in the Wellington area have dropped in recent months, now only 2 per cent above last year, down from 3.2 per cent reported last month.

In Christchurch, values are 3.2 per cent above last year, and in Dunedin 2.7 per cent.

Hamilton and Tauranga are both below the same time last year, dropping 1.5 per cent and 0.9 percent respectively.

Napier (3.2 per cent), New Plymouth (3.3), Wanganui (4.2), Nelson (2.6) and Invercargill (3.0) all remain above last year.

Rotorua (1.0 per cent), Gisborne (0.3 per cent), Hastings (1.3) and Palmerston North (1.6) all have values similar to the same time last year.

Values in Whangarei have continued to drop since late 2009 and are now 2.8 per cent below the same time last year, and Queenstown Lakes values are 1.5 per cent below.