Lending restrictions are behind a sharp drop in the number of cheaper homes being sold in Tauranga.

Latest Real Estate Institute of New Zealand (REINZ) figures show the median Tauranga house price in June rose 17.4 per cent year-on-year to $405,000, while property sales slipped from the previous year, dropping from 125 to 119.

Sales in Mount Maunganui and Papamoa dipped to 77 from 81 last June, but house prices were up 2.4 per cent at $420,000.

Harcourts owner Max Martin said properties in the central Tauranga suburbs of Otumoetai and Greerton, where there were homes in the $200,000 to $300,000 price range, were taking longer to sell.


Residents of some of these homes, traditionally sought after by first-home buyers, were having a tougher time selling up before moving into rest homes, he said.

Meanwhile, Harcourts' Mount Maunganui and Bethlehem offices had experienced a record June for sales of homes valued at more than $500,000.

Mr Martin attributed this to increased confidence in the market and people moving to the region from out of town. Investors were also buying in the higher market, seeking lower maintenance homes commanding higher rents and better tenants, he said.

REINZ district forum leader Dickie Burman said the impact of the lending restrictions, which came into effect in October, might be forcing those in need of an urgent sale to lower their price.

He put an increase in the number of higher value sales down to a catch-up from slower sales in the past few years and increased confidence in the general market.

Others were also moving from out of town.

"It's a great place to live. All the planets are aligning in regards to what's happening in Tauranga city," he said.

LJ Hooker owner Neville Falconer said homes in the $250,000 to $300,000 range were still selling but at a slower rate.

"They're just maybe taking a little longer than they would have 12 months ago, before the LVR came in."

Ross Stanway, chief executive of Realty Services, which operates Bayleys and Eves, said first-home buyers were not the sole market for cheaper homes.

Investors wanting to rent the properties out, and older couples wanting to downsize from the family home, were also looking for quality and value in the lower price bracket.

Aucklanders could also have very good equity in a property by relocating to the lower bracket of the Tauranga market.

Greg Purcell, franchise owner of Ray White Mount Maunganui and Papamoa, agreed that despite the lending restrictions and cost of borrowing, prices at the lower end of the Western Bay market were still a lot cheaper than those at the bottom of the Auckland market.

Over the past 18 months, he had also noticed landlords selling rentals they had bought between 2003 and 2007, freeing up more properties in the cheaper price range. "When the market dropped, I think some of these people chose to hang on to their property for three or four years.

"When prices started to rise some of these were leaked back on to the market," he said.