Despite fears of a property slowdown, New Zealand's strong economy will help to keep house prices steady by attracting migrants and keeping Kiwis here, says KPMG.

House hunters will be wanting the current property cycle to slow or reverse after its great run over the past few years, according to the professional services firm.

"However, market data is mixed, and while it does show a definite slowdown compared to previous years' growth, explicit major declines are not yet clearly discernible," KPMG said in the commentary to its latest Financial Institutions Performance survey.

QV's latest data showed Auckland property prices in the 12 months to August rose by 2.8 per cent - the slowest growth rate in six years.


KPMG said steadily increasing floating rates on new mortgages might be contributing to a cooling demand from house buyers.

Loan-to-value restrictions in New Zealand and rules in China restricting the flow of money overseas had also played a part.

"However, fundamental factors bolstering the market are expected to persist over the short to medium term. For instance, New Zealand's relatively prosperous economy amongst the advanced economies continues to attract migrants and deters Kiwis from emigrating or encourages them to return, thereby supporting demand," KPMG said.

Gross domestic product growth for the June quarter hit market expectations at 0.8 per cent, and was 2.5 per cent for the year.

Statistics New Zealand data showed monthly net migration was 5490 in August - down from 5800 in July and the second monthly fall in a row. Annual net migration was 72,100 for the year to August, down from 72,400 in July.

KPMG said higher costs were a big factor in a dip in the profits of New Zealand's banks.

Figures from KPMG's latest survey show net profits across the banks fell 1 per cent to $1.19 billion in the three months to June 30 -- down from $1.2b in the March quarter.

John Kensington, KPMG's head of banking and finance, said the main driver for the dip was an increase in operating expenses, which rose 14 per cent, or $165.5 million, over the quarter to $1.35b.

That was partly offset by an increase in net interest income, which rose by 3.32 per cent, or $165.46m, and an increase in non-interest income, which was up by 6.3 per cent, or $42.8m.

Kensington said the banks had lower impaired assets expenses, which reflected their focus on sustainable and diversified lending.

Loans and advances by the banks grew by 1.18 per cent over the quarter to $394.5b but this was the lowest quarterly growth in three years.