New Zealand's housing market is going through the longest and deepest downturn in 30 or 40 years, property data firm Cotality says.

It has released its latest property market data, which shows a 0.3% fall in July, after a similar drop in June.

It reported a national median value of $804,303 in July, down 1% from three months ago, and 0.7% lower than the same time last year.

Dunedin and Christchurch were up 0.2% in July, but Hamilton dropped 0.2%, Wellington fell 0.5%, Auckland was down 0.6% and Tauranga 0.7%.

Invercargill had the strongest gains in property value over the past year. 

Cotality's data has shown that first-home buyers have been a record share of the market but investor activity has been more subdued.

Property economist Kelvin Davidson said they were a "really interesting" group because lower prices and a large number of properties for sale should create good buying conditions for them.

"But they're also just getting a bit warier of things. They're seeing flat rents, rising costs in terms of rates and insurance… I think they've also got a pretty clear eye now on the election around what might happen and in terms of the result.

"If we see a switch of government, what that would mean for tax policy around property. It looks pretty certain we'll get a capital gains tax if we shift government.

“And then just waiting on any announcements around interest deductibility - would that be phased out again, if so, does it go all the way to 100 % phasing out or does it stop halfway? That is really on investors' minds at the moment."

Investors were worried about cashflow because even the prospect of future capital gains was "all a bit academic" if they could not afford to hold the property in the meantime, Davidson said.

It was now probably close enough to the general election on November 7 that many investors would decide to wait and see what happened, he believed.

"We've already seen the figures that our investors are pulling back a little bit."

It would be something that he would keep an eye on over the coming months.

Overall, the data was a continuation of the trend of the first six months of the year, he said.

"Property sales volumes have inched lower so far this year, although they're still at a relatively normal level. But the stock of listings remains elevated and this is giving buyers the balance of power when it comes to pricing.

"It's therefore no surprise that values generally remain sluggish. The major downturn actually happened back in 2022 and 2023. But it's been a soggy picture ever since and there's certainly little sign of any meaningful upturn on the horizon yet."

Davidson said the economic outlook was more uncertain than usual, given the conflict in the Middle East and problematic inflation.

"Mortgage rates haven't moved much in recent weeks, but the likelihood is that some rises are on the cards again in the short term."

The North Shore and Waitakere were the softest parts of Auckland.

"The super-city seems to be lacking a bit of economic confidence right now, which will be weighing on housing activity and prices. But the pipeline of new housing supply is still relatively large, especially for townhouses, and this is also generally dampening property values. While this won't be welcomed by existing property owners or vendors, it's good news for first home buyers, who remain active across Auckland."

In Wellington, prices had dropped 3.1% in the past three months, and Davidson said buyers had the pricing power.

"Economic confidence generally remains subdued, and election uncertainty may just keep a lid on sentiment for at least the next few months as well."

Invercargill had the strongest gains in property value over the past year of any district in or city in the country.

It is up 8.2 % over 12 months.

"It's also one of only four areas to have median values at a record high ($565,397), alongside Gore, Mackenzie and Hurunui," Davidson said.

"Each of those areas tends to be strong in either farming or tourism, or both, and with these sectors of the economy faring well, it's no surprise that there's been some degree of spillover into the property market. They're not seeing a spike in prices. But there is more resilience than many other areas."

Davidson the broader national "downphase" in the property market was the longest and deepest recorded in at least 30 or 40 years.

"Values will almost certainly start to rise again at some stage, reflecting long-term factors such as population and wage growth. But this may be a story for next year, and in the meantime, there seems to be a mindset shift under way."

He said house sales and listings were tracking sideways, and buyers having the pricing power were keeping prices flat, but there were relatively few forced sales, which meant vendors did not have to capitulate.

"Yes, buyers have the power, but it's not all the power. Vendors don't have to sell at any price."