Aerial photograph of Rotorua City. Photo / Andrew Warner
The average property value in Rotorua has dropped nearly $74,000 since its market peak in April last year, new data shows, with house prices expected to fall further in 2023.
Rotorua salespeople say the falling house values are “good news” for first-home buyers who have time on their side, but one says the lull won’t last as long as some people might think.
OneRoof’s January 2023 report showed Rotorua’s average property value in December had dropped to $730,600, down 9.2 per cent since its highest in April 2022 at $804,400.
In the wider Bay of Plenty, the average property value had dropped more than 9 per cent - or $97,600 - to $991,400 since its peak of $1,089,000 in April.
Senior research analyst at OneRoof’s data partner Valocity, Wayne Shum, said some Rotorua suburbs enjoyed value growth in the past year despite the whole city’s value falling, such as Hamurana and Lynmore, which jumped about 2 per cent.
“However, their growth rate was much smaller than those experienced in the boom of 2020 and 2021.”
Shum said more suburbs saw value declines than growth in the past year. Suburbs like Mangakakahi and Fairy Springs fared less well, declining by 7.4 per cent over the past 12 months, he said.
Lake Tarawera was the most expensive, with a current average property value of $1.5 million. The cheapest was Fordlands, at $398,000.
Shum said the rising mortgage interest rates had deterred buyers from entering the market, particularly among investors facing higher holding costs against stagnant rental growth.
“Investors have been active in the region during the boom period.”
Potential buyers were taking their time instead of rushing due to fear of missing out like in 2020 and 2021, as many expected prices to fall further throughout 2023, he said.
“Debt serviceability will continue to plague buyers; the RBNZ will likely lift the OCR again if inflation remains high.”
First National principal and Rotorua REINZ spokeswoman Ann Crossley said it had been well and truly heralded in the media that property prices were falling.
“Buyers are expecting to pay less.”
Crossley said falling values were “good news” for first-home buyers. However, they still had to be able to afford it.
“Although there is more to choose from and less urgency to act, the finance side of things is going to be tougher.”
Lynmore’s rising property values were likely due to the number of new property sales in the area, while Hamurana featured lifestyle homes, she said.
Crossley said the number of properties for sale was slowly rising, but sellers did need to expect to be on the market for longer.
Professionals McDowell Real Estate principal and auctioneer Steve Lovegrove said buyers’ confidence and enthusiasm were low, as they read about house prices continuing to fall.
But Lovegrove said the market would soon start to pick up again.
“There is a reason why the market fallback may not last very long at all, and the reason is we have not seen a lot of stock coming on to the market.
“The property market is like a dam at the moment, and as soon as it lifts, that dam is going to break. There is a lot of pent-up demand.”
Lovegrove said as finance became harder to get, first-home buyers were looking at other ways to step onto the property ladder, and were starting to jump on low-value properties to renovate.
“I think first-home buyers will start to look at something a little less glamorous, or they will wait.”
Ray White Rotorua business owner and principal Jacqueline O’Sullivan said rising interest rates, a lack of investors and first-home buyers in the lower end of the market, stock levels, and properties taking longer to sell had all contributed to falling house prices.
“Rising interest rates have had a significant impact on affordability. The market is looking for some kind of stability when it comes to mortgage interest rates,” she said.
“Last year, there was uncertainty as to how high they were anticipated to rise, and we have come no closer to being able to answer that question.”
O’Sullivan said some investors had also retreated from the market due to rising costs and fear of over-capitalising.
“With rising stock levels, we are going to experience buyers investigating the market for longer periods of time, completing their research, and making sure they are getting value for money.”
However, she said people were still looking to buy and sell, and “this won’t change”.
“It’s about matching the right property to the right buyer - which is proving to take a little longer than what we experienced in 2021, but is actually more in line with the market of earlier years.”
O’Sullivan said 2020 and 2021 were two “unbelievably busy” years, and “overheated” prices could not carry on rising the way they were.
“It was an adjustment that needed to happen.”
The falling prices meant first-home buyers had a better chance to get their feet in the property market again, she said.
“I suggest they should sort out what they can afford now with pre-approvals in place so that they can have another go at securing a first home. There is more power for the buyers now to negotiate a fair price.”
Rotorua Lakes councillor Fisher Wang said he had grown up in Hamurana - one of the few suburbs that increased in value in the past year - and his family had a farm there.
“It is just such a supportive and connected community. Everyone keeps an eye out for each other.”
Wang said there was a “real mix” of people who lived in the suburb, from young families to retirees.
“We have an amazing school here, and we do see a lot of younger families moving into the area.”
He said there were also plenty of new developments being built.
“It is attracting more people to move to the area.”
Hamurana also gave its residents “ecological diversity”, with the lake at their doorsteps on one side and a more rural setting on the other, he said.
Local Democracy Reporting obtained the decision through the court.