A leading economist believes New Zealand has an over-abundance of land and says prices will have to come down in the near future.

ANZ chief economist Cameron Bagrie warned "prices are going to have to adjust and this will be the story of 2010."

Bagrie says there is an over-abundance of land and prices are over inflated.

Currently the value of properties was concentrated in the land and there is no shortage of it in most regions, except for the big centres like Auckland, he said.

Bagrie pointed out Northland as an example of somewhere that could be hard hit given "there is a real surplus in that region."

"If you look at house prices compared to incomes in New Zealand, I would suggest they are overvalued."

Data collected from Quotable Values Property IQ division show house sales in some areas of Northland have been on a downward spiral for some time.

Whangarei house volumes sales have fallen by 55% since 2005, Dargaville house volumes sales have fallen a staggering 66%.

Despite this, property prices in Whangarei have only slipped by 12.7% and in Dargaville 6%.

Europe-based economist Georgina Zervudachi says this would indicate a drop in property prices yet to come.

"Price is set by a willing seller and a willing buyer," she says.

She says the seller may be right to wait as extremely low interest rates like what we are experiencing now have tended to support the housing market.

Massey University Lecturer Bob Hargreaves says the reason why property prices haven't come down that much comes down two key factors.

"It's a psychological thing, people that brought their properties at the height of the property boom don't really want to sell at a loss, so you've got people just sitting there holding onto their properties.

He also points out that another reason for property prices staying relatively stable are the low interest rates which make it more attractive to buy now.

But warns, "interest rates will go up before they'll go down again."