New Zealand’s housing market was one of the best performers in the world in 2016, but home owners and property investors are now facing falls in house prices as a new wave of property development combines with stalling demand to create a glut in some areas, according to one of New Zealand’s biggest estate agents

Property price inflation has slowed in recent months as banks tightened up their lending policies, and may continue to do so with interest rates set to start increasing this year.

Barfoot & Thompson report that the average sale price in New Zealand dropped to NZ$913,709 [£526,880] in December, down 2.1% from November, its second monthly decline, though still up 5.1% from a year earlier.

Thompson said the monthly dip in prices was similar to what happened in December 2015, when the average sales price dropped by 0.8%, the median price rose 0.8%, and the volume of sales fell 19%.

“December’s modest price retreat is similar to what occurred last December and it took until March for the upward price trend to re-appear,” said Barfoot & Thompson managing director Peter Thompson.

The volume of homes sold in Auckland, the country’s largest city, fell 24% to 721 and the median sale price slipped 1.2% to NZ$840,000 [£484,380] last month, Barfoot said in a statement. The median price was up 5% from December 2015, while the volume of sales was down 9.4%.

“While prices definitely eased there was certainly no suggestion that current prices are under any great downward pressure and normal sales numbers are being achieved,” Thomson added.