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Westpac has become the latest bank to lower its house price forecast.
It now expects 4 percent price growth this year, rather than the 6 percent it forecast previously.
While property market activity has picked up through the first half of this year, house prices have not moved much.
ANZ and BNZ earlier lowered their expectations for increases.
"We've had about 1 percent house price growth in aggregate in the first half of the year," Westpac chief economist Kelly Eckhold said.
"Activity in the housing market has improved and it's sitting above average levels, which is exactly what we expected would happen.
"But it's that linkage between the volume of sales and level of price growth that seems to be diverging relative to what you would normally see."
He said there had been an "unusually strong" supply response as demand for houses increased.
"What often happens in the New Zealand housing market is that supply can be relatively unresponsive to increases in demand. Then when you get that happen, you tend to see prices run up quite quickly. But in this cycle, because we've had a couple of years where the market has been moribund because sellers haven't really wanted to sell property while house prices were falling, as was the case especially through 2022, you've had this kind of large stock of what I would describe as unrequited sellers.
"Now they've seen some demand pick up in the last six to nine months as interest rates have fallen, they've really taken the opportunity to get their houses on the market. So we've seen supply rise at the same time as demand has, leading to what I'm describing as a well balanced market."
He said he expected house prices to lift 0.75 percent in the September quarter and 1.75 percent in the three months to December, in the "prime selling season".
Next year, Westpac expects 6 percent growth.
Eckhold said sellers who had good properties that were well presented should be able to sell their homes.
"Plenty of people are finding buyers, that's the encouraging thing about this market. On a year-on-year basis, house sales have increased by 16 or 17 percent, which is actually at the high end of average.
"If you want to sell or if you're looking to move there is going to be liquidity there as long as you've got your price set at the right level."
