The CoreLogic House Price Index showed that the annual house prices across the country continued to drop and were expected to fall between 15% and 20%.
Dunedin was down 10%.
January’s CoreLogic House Price Index reported that residential property values fell 7.2% from a year earlier, the biggest 12-month decline since May 2009.
Mr McKnight, a principal economist with the property investment firm, said that the price fall in Dunedin had not been as steep, partly because prices in the city had not gone up as much as the rest of New Zealand.
He also said the Dunedin property market appeared to be 1% overvalued.
"When compared to many other regions in the country the overvaluation was not too high," Mr McKnight said.
He expected price declines would stabilise by July or September, and would then slowly recover.
Property overvaluation, an increase in the interest rates and regulations by banks in lending were three major factors which had caused the price drop.
The property market was overvalued across the country and, for example, South Waikato property prices were overvalued by almost 40%, he said.
That downward trend was a correction and would stabilise, he said.
Mr McKnight co-authored the recently published book Wealth Plan with Opes managing partner Andrew Nicol.
He said it was a guide to investing in property.
"It lays out a plan on how somebody can use property across their lifetime to build wealth."
He felt that before making an investment, an investor had to look at a few metrics, such as size of population, potential population growth, and potential value growth.
Dunedin was an average market for property investment and population growth projections were very average, Mr McKnight said.
"Dunedin’s population is the sixth highest in New Zealand and the house prices tend to grow more consistently in cities with larger populations.
"Regions that have faster population growth often get faster house price growth.
"Of the total 67 councils in the country Dunedin comes at 55, which is below the midway."
Wealth Plan was released on Wednesday and had pre-sold 2000 copies, which showed the interest in property investment, Mr McKnight said.
He said people were motivated and interested in creating wealth by investing in the property market, and many young people were looking to invest in property.
Mr McKnight said the recession would not have much impact on the property market.
"When you plan to buy a house, two things are very important - affordability and other job security.
"As long as you have a job and your employer won’t shut the business, property is always a good investment."
