House prices in Rotorua continue to rise. Photo / File
Demand for property in the Bay of Plenty continues to defy the odds as the region reaches a new record median high and logs the highest sales volumes in more than three and a half years.
According to the REINZ monthly report released yesterday,the median house price in the Bay of Plenty has reached an all-time high of $709,000 -- up 17.8 per cent from $602,000 in September last year. It is the first time the region's median has exceeded $700,000.
Within the region, Tauranga City logged a record median price of $780,000, Western Bay of Plenty District rose to $755,000, the Rotorua District reached $521,000, and Whakatāne District reached $661,000.
The 17.8 per cent increase was in line with a nationwide median increase of 14.7 per cent in the same timeframe and 17 per cent increase if Auckland was excluded.
But despite the rising prices, houses are selling.
Sales in the region were up 31.2 per cent from 442 in September 2019 to 580 in the following 12 months. It was the highest sales volume in 42 months.
OneRoof editor Owen Vaughan said house prices in the regions were catching up with Auckland.
"In the regions, the market has just caught up [with Auckland] the last couple of month. It's been supercharged. There has been rapid escalation with house prices in the region.
"The days where buyers, investors, first-home buyers could pick up a cheap as chips home are just gone.
"There are more buyers, and you see more people at open homes and auctions making offers, and that's pushing prices up."
Applications for a first-home grant in Rotorua are capped at $400,000 for existing homes or $500,000 for new homes. In Tauranga City and the Western Bay of Plenty, the cap is $500,000 for existing homes of $550,000 for new builds.
The REINZ report showed the number of homes sold for under $500,000 nationwide also fell to 24.9 per cent. This was the first time on record more than 75 per cent of the market had sold for more than half a million dollars.
When asked if that home grant cap needed to change, Vaughan said: "Any property grants to help to get first-home buyers in the market are to be welcomed, but it's got to reflect where the market is. There's no point getting a fraction of what you need to get into the market."
First National Real Estate principal and Reinz Rotorua spokeswoman Ann Crossley said, in Rotorua, there had been 129 sales last month. Of those, 11 went for more than $1m, and 54 went for below $500,000.
"I'm not surprised by 129 sales. We've had an incredibly busy month.
"As far as the election goes, normally prior to that, people stop making decisions. This one hasn't because the election feels almost secondary. It hasn't been the feature of the year.
The REINZ report also showed an increase in the use of auctions to sell property nationwide - from 13.1 per cent to 16.5 per cent. That was reflected locally with almost 23 per cent of properties - 133 - sold under the hammer.
It was the highest in four years and more than double the 52 the previous September.
Crossley speculated this could be because auctions were more likely to guarantee a sale.
Sales agreements were more likely to fall over if properties were sold under contract because the vendors and buyers had a timeframe to meet conditions. Under auction, those conditions should already have been met.
Professionals McDowell Real Estate principal Steve Lovegrove said the change in median price was "massive" for the city but not surprising.
Properties were selling faster than they were coming on the market and prices were being moved by a "massive shortage of available properties", He said prices would only continue to rise until developments got underway, he said.
He said developers were "urgently" looking for sections to subdivide, with the trend of "infill housing" coming as a result of a lack of land to build on.
Infill housing was where an investor bought a small block of land with one property on it and subdivided as many ways as possible, he said.
Economically, the city's market was predicted to fare badly post-Covid due to its reliance on tourism, however, the "complete and utter opposite" had happened, he said.
He said they were seeing a large number of entry-level buyers as rental costs continued to rise and people were opting to service a mortgage instead.
Tremains Bay of Plenty general manager Anton Jones said the expected slow down in the market pre-election had not happened.
Instead, September was extremely busy as interest rates dropped and demand continued to soar.
Some buyers had "spare money" knocking around from a missed overseas holiday and were choosing to spend it on investment property, he said.
First-home buyers were "coming out in force" as money was "cheaper to borrow" than ever and they were able to service bigger loans.
In his opinion, prices would only continue to rise as interest rates dropped, demand would surge even more, and the market will continue to boom.
REINZ chief executive Bindi Norwell said the figures were continuing to buck the trend.
"Normally one month out from an election, people start to take a wait and see approach and sales volumes begin easing off. However, 2020 appears to continue in its trend of being an anomaly.
"Sales volumes around the country continue to defy expectations."
Norwell said the market activity was being driven by low borrowing rates and consumers having more money available due to a lack of international travel.
"When you then add in high levels of confidence in the housing market, the removal of the LVRs back in March and people's fear that prices are just going to keep increasing in the future, then this explains why people are going to such lengths to secure a property now."
Norwell said the Rotorua District and Tauranga City had two consecutive months of record median prices and she expected prices to continue upward.
"With no uplift in the total pool of properties available for sale, at this point, it looks as if prices will continue to rise as we head toward Christmas."
Jefferies and family will enjoy a leg of lamb with summer sides.