Quotable Value says property values across the country are 5.6% higher than at the same time last year.
However, the figure has dropped from the 6.1% reported in April and is the first decline in the annual change since March last year.
Nationally, values are now 4.1% below the market peak of late 2007.
The average sales price for the three months to May fell to just over $403,000 from $405,000 in April.
QV says consumer confidence in the second half of last year was returning after the recession, and that flowed into the property market.
However, research director Jonno Ingerson says an increase in properties for sale in the first few months of this year, combined with less demand, has begun to push prices down.