Property prices and sales continued to drop away during December, as the traditional Christmas shut-down caused the market to slow, latest figures from the Real Estate Institute show.

The data shows house sales and prices fell during December, while the number of days to sell held steady at 39.

The REINZ Monthly Housing Price Index decreased by 0.6 per cent in December, from November, and was down 1.6 per cent on year-ago levels.

The volume of sales in December fell to 4397 from 5138 during November and 4957 during December 2009, but were up on August, September and October figures.

Meanwhile the national median price fell to $352,000 in December from $360,000 in November.

ASB economist Chris Tennent-Brown said the market remained frail, and continued to be tipped in favour of buyers.

"We continue to expect softness in prices over the months ahead, with prices remaining down on year-ago levels, and around 5 per cent off the 2007 peak."

REINZ chief executive Helen O'Sullivan said December sales were often subject to the timing and impact of the 'great New Zealand Christmas shut-down'.

The decline in turnover also followed a fall in listings in December and in the number of houses on the market as a result of good sales in November, she said.

O'Sullivan expected January's figures would provide a better picture of market activity during summer.

"Anecdotally our members are reporting increased activity so it will be interesting to see how that translates into listings and sales," she said.

Goldman Sachs economist Philip Borkin said the latest information showed the housing market (at least on a turnover basis) may have 'formed a base' after a dire run over the middle part of last year.

House prices, however, appeared to remain under downward pressure.

"These are not major falls by any stretch of the imagination, and we do not envisage a large correction in house prices even though we still class them as overvalued," said Borkin.

"This is largely due to supportive demographics and an improving labour market backdrop that reduces the likelihood of forced sales. However, we do expect further modest falls in prices as vendors price expectations adjust before a stabilisation around the middle of this year."

Borkin said that the housing market was a good leading indicator of domestic demand in New Zealand, so the improvement in turnover was consistent with his view that "economic momentum" would gradually build during 2011.

* Only three of New Zealand's 12 regions saw improved market conditions in December from a month earlier.

They were: Hawke's Bay ($269,000 to $285,000), Taranaki ($265,000 to $268,000) and Otago (230,000 to $235,000).

Nationally the total value of residential sales, including sections, fell to $1.9 billion in December from $2.26 Billion in November.

The breakdown of the values of the properties sold was 154 for $1 million plus, 517 between $600,000 and $999,999, 1106 between $400,000 and $599,999 and 2620 for under $400,000.

- NZ HERALD ONLINE