City house prices soaring but sales slow down
Palmerston North's property prices have cracked $300,000 for the first time in more than six years but not all aspects of the city's property market are booming.
The median house price in Palmerston North last month was $306,250, up 9.5 per cent and just shy of the October 2007 record of $315,000.
But while prices are soaring in the city, the number of houses being sold has fallen through the floor.
The total of 94 houses sold last month was down 29.8 per cent from March last year.
The drop was not a blip, either, with sales down year-on-year in all months back to last November.
Since October, banks have been limited in how many high loan-to-value (LVR) ratio loans they can give out due to Reserve Bank restrictions on lending.
Banks have only been able to have 10 per cent of any new-home mortgage lending devoted to people wanting loans with deposits of less than 20 per cent.
Real Estate Institute of New Zealand Manawatu spokesman Andy Stewart said there were far fewer first-home buyers in the market, with many others having to lower their expectations due to the LVR limits.
While the limits were always going to have an effect, Stewart said they were set to hit other parts of the market.
"This change has also caused a ripple effect on the local market, slowing the sale of first homes and stalling vendors from selling their first home and purchasing their next property," Stewart said.
That worried those selling houses and, combined with a 25 per cent increase in property listings since January, had contributed to Palmerston North going from a sellers' market to a buyers' market, he said.
The drop in sales but rise in median price can be attributed to the type of properties being sold.
In March last year, about 63 per cent of properties sold for under $300,000 and 85 per cent sold for under $400,000.
Last month, 49 per cent of properties sold for under $300,000 and 72 per cent for less than $400,000.
Palmerston North's trends match the national average. Dwelling sales were down 10 per cent on March last year, while the median price climbed to a new high of $440,000.
REINZ chief executive Helen O'Sullivan said only two out of 12 regions had an increase in sales from March last year to this year.
Auckland and Canterbury were continuing to drive the national market, largely because there was not enough housing stock to meet demand, she said.
Waikato/Bay of Plenty was also seeing good growth, which set it apart from other areas.
O'Sullivan said those three areas were performing strongly, while the rest of the country was more subdued.
LVR restrictions affected the market in those subdued areas more than in the growing ones, she said.
- Manawatu Standard