Tauranga first-home buyers could soon be back in the market, as the Reserve Bank announced low deposit lending restrictions could be scrapped by the end of the year.

The controversial measures have forced most home buyers to raise 20 per cent deposits, putting the property ladder out of many people's reach, amid claims provincial New Zealand was being targeted unfairly.

But in a speech yesterday, Reserve Bank deputy governor Grant Spencer said pressures in the housing market were easing gradually and the lending restrictions were achieving their purpose.

"The volume of house sales has dropped considerably across the country, other than in Canterbury, and the slowdown in volume has also been reflected in prices."


The earliest date for rolling back restrictions was likely to be late in the year.

Bay of Plenty Harcourts Advantage managing director Simon Martin said the restrictions were a blanket policy that should never have applied to regional New Zealand.

"I never thought it was necessary in our marketplace, so it's not surprising they have turned it around."

Cheaper property sales had dropped off since the speed limits were introduced on October 1, he said. "The Tauranga marketplace has been more affected than the Mount and Papamoa because there were more cheaper homes in Tauranga.

"The volume of sales in January and February and March [in Tauranga] is quite substantially down on January, February [and] March last year."

Tauranga Realty Services chief executive Ross Stanway said removing the lending restrictions for first-home buyers would be a good move.

"It just hasn't worked," he said.

"The latest QV results also indicate the way things are tracking, which is not the way the Reserve Bank wanted."

He said Tauranga was experiencing a housing shortage, which was also making the situation worse.

"I would hope to see the restrictions dropped sooner rather than later." LJ Hooker Tauranga franchise owner Neville Falconer said the LVR restrictions affected a decent segment of the property market and if it was removed there would be a level playing field among property buyers.

"I expect the first-home buyers would no longer be cannon fodder in the housing market."

The Bay of Plenty Times yesterday reported that latest QV figures showed the average house value in Tauranga reached $449,331 last month - up 4.8 per cent from a year ago.

The average house in the Western Bay was worth $412,729 - up 4.2 per cent from the previous year.

The Reserve Bank introduced loan to value restrictions in October last year, limiting banks' lending to borrowers with less than a 20 per cent deposit to 10 per cent of new lending.

Mr Spencer said without those restrictions annual house price inflation might be 2.5 per cent higher.

Labour's housing spokesman Phil Twyford called on the Government to "fine tune" the restrictions by applying them only to Auckland and Canterbury.

"Why should regional New Zealand continue to be punished for the Government's failure to fix the Auckland housing crisis and get the Canterbury rebuild happening?"

ASB economist Christina Leung said the Reserve Bank would not remove the restrictions unless it was confident the housing market was slowing on a sustained basis and that interest rates would contain house prices sufficiently.