The housing market is at a turning point with sales activity and price growth expected to peak in the coming months, if they haven't already.

CoreLogic's Property Market and Economic Update for the second quarter ended in June found the residential property market is losing momentum.

After a hot start to the year, sales have fallen back to levels last seen in 2019 with fewer properties on the market while house price growth lost pace, falling from 3.1 per cent in April, to 2.2 per cent in May and to 1.8 per cent for June.

"As sales activity dips over the months it's also likely that a slowdown for values will become more evident, although house price falls still seem unlikely in this cycle," says CoreLogic chief economist Kelvin Davidson.

The slowdown in prices is largely due to affordability pressures, but also because of the 40 per cent deposit requirement and extended bright-line test for investors, as well as the tightening of interest deductibility rules and the Reserve Bank's plan to look at debt-to-income restrictions.

In the near term, the report says the market is likely to be affected by tighter monetary policies, with many experts forecasting the RBNZ will raise the official cash rate in August, after it halted its bond buying programme last week.

In anticipation, the major banks have begun raising their fixed-term mortgage interest rates ahead of any decision by the Reserve Bank.

Davidson says this will affect new borrowers.

For example, a 36 basis point increase in a 2.95 per cent interest rate will require additional payments of $1824 per year on recently issued $800,000 mortgage, he says.

If retail interest rates rise to their long average of six per cent, that same mortgage will cost and extra $19,000 a year in repayments.

"Those who have entered the housing market since 2014, the last time the OCR increased, have only experienced low interest rates so the effects of a pattern of increases will likely come as a shock to many of those with a hefty mortgage, which includes many who have bought recently in Auckland and Wellington, the most expensive markets," Davidson says.

"For those still trying to buy their first home, interest rate increases will raise the bar to entry."

However, Davidson says an increase in the OCR is a necessary step as the RBNZ looked to reign in the emergency support measures it put in place in response to the pandemic.

The suite of policies unveiled by the government to cool the housing market are yet to have an effect, he says, but he anticipates the tax changes will drive more investors to consider new-builds in the coming months.

"As the market cools ... we should see the 'normality' return to sales activity and price growth."

-RNZ/Nicholas Pointon.