Housing New Zealand properties are struggling to fetch government valuation but what effect it is having on the Wanganui market is up for debate.
Housing NZ sold 41 properties in Wanganui last year at an average $64,000 while the average government valuation of those properties was $95,000. The sales made up about 5 per cent of the Wanganui market.
Labour Party housing spokesman Phil Twyford said the low price and high volume of Housing NZ properties on the market was contributing to falling property prices in the city.
"Housing New Zealand is threatening the property values of people in Wanganui by selling off these homes substantially below their market value," Mr Twyford said.
"It is irresponsible and damaging to the local community and Housing New Zealand is exacerbating the risk of homeowners falling into negative equity."
The median sale price in Wanganui fell from $184,150 to $150,500 over the last year - though that is not necessarily an indicator of the average market value.
"Wanganui is losing a valuable social and economic asset much needed by needy families, as shown by the fact that there are currently 10 families on the state house waiting list," Mr Twyford said.
"There is a need for state houses in Wanganui."
Whanganui MP Chester Borrows said the houses being sold off were no longer fit for purpose and supported the sales.
"There might be some people on the waiting list for some houses, but what sort of houses are they on the list for? Most of the sales are house that have not been able to be tenanted for a long time."
Mr Borrows argued the sales would not be lowering the sale price of other properties as they would not be in competition with houses on the market in different suburbs.
He also defended the price at which they were being sold. "If you put it on the market for say $160,000 and it sells for $80,000, that's because no one came in and offered $160,000. The market sets the market value."
Ray White Wanganui principal Tim Hocquard said most properties in Wanganui were able to be sold near or at government valuation.
He said Housing NZ sales would dilute the market and did affect the "achievable value" of other properties, especially those in close proximity. On the other hand, Mr Hocquard said it was great for first home buyers and investors.