Tauranga house prices dropped by $59,000. Photo / NZME
Tauranga's median house price has had the biggest fall since records began 30 years ago, dropping $59,000 in a month.
Fear of overpaying is replacing the fear of missing out, while rising interest rates and tighter lending criteria were factors in the record drop, agents say.
However, one economic commentator says the city is in a better position than the rest of the country.
The latest Real Estate Institute of New Zealand figures showed Western Bay of Plenty's median house price dropped $140,000 - or 12.7 per cent - to $960,000 in April.
Tauranga's dropped $59,000 - or 5.6 per cent - to $991,000 and Rotorua's dropped $70,000 - or 9.1 per cent - to $700,000.
Across the region, the median price was down four per cent and sales were down 29 per cent.
It was also taking an average of 41 days to sell a property, five days more than March and 11 more days than April 2021.
REINZ chief executive Jen Baird said Tauranga's median prices had never dropped this much since records began 30 years ago.
The previous biggest monthly drop was in July 2017 when house prices fell $52,500, she said.
Baird said the Western Bay was a smaller, more volatile market, and the most recent drop of this size was in October when house prices fell $160,000.
Tremains Bay of Plenty managing director Anton Jones said vendors were finding the market difficult, with more choices for buyers who previously had to wait or enter bidding wars.
Jones said school holidays and long weekends were a factor in the drop, with property listings jumping from 50 to 90 in the first week back at school.
First National Real Estate Tauranga general manager Cameron Hooper said he had not seen a drop in price like this since the Global Financial Crisis (GFC).
"That's the first time in a long time that less than 200 houses have sold in Tauranga City ... it's pretty scary knowing we're at 160," he said.
"I think next month will be just as bad."
He said the "only positive" was that there was not a flood of listings as this could push prices further down.
High interest rates, the fear of paying too much, and an inability to get finance from banks had softened the first and second home buyer market, he said.
The "dream price" of last year was gone and people who had to sell would likely have to drop their price.
"If you pay five or 10 per cent too much for your property and it's your first or second home, that's wiping out your entire equity in that house.
"If I was a first home buyer, I wouldn't be buying a home now. I'd just let it settle and wait for spring or summer."
Mortgage Lab owner and chief executive Rupert Gough said the numbers were "disappointing" but not unexpected.
Gough said getting finance was "so much harder and complicated" than last year and there was not an influx of Aucklanders looking to move down.
He said it was a "self-perpetuating cycle" as people who were not confident that they could sell their house would not put an offer on another.
However, buyers had more options and competitive prices.
"Until you see some sort of flattening out, people are going to be wondering where the bottom of the drop is ... it wouldn't surprise me to see further drops."
Economics commentator Tony Alexander said Tauranga and Western Bay house prices were in a better position than the rest of the country.
Alexander said buyers had stood back from the market in the face of the rising cost of living, interest rates going up, and the fear of missing out going out the back door.
Property Brokers regional manager for the Bay of Plenty, Simon Short, said the drastic price drops came down to interest rates.
"We all saw it coming and it's here now, it's a buyer's market."
Young couple buy their first home
Karl and Letesha Arrowsmith felt like owning their own home was going to be impossible.
But after an emotional two-year-long journey of "setback after setback," the Tauranga couple say it was well worth it.
The Arrowsmiths, both aged 25, said they felt for first home buyers doing their best to get onto the property ladder.
"Especially people like us who have been looking for ages but keep getting outbid or needing to compromise on certain things about the houses they look at," Karl said.
The couple started looking for their first home in 2020 and had gone through the process of getting pre-approval from the bank.
A few months later, Letesha fell pregnant and ended up leaving her job due to some health concerns.
"We kept looking ... and dreaming about our first home but it just wasn't possible right then," Karl said.
It wasn't until mid last year when the pair continued seriously searching again for a house.
Karl said the bank was willing to lend them $397,000 and they used their KiwiSaver, sold their boat, and had some help from their parents to get together a deposit.
"We were looking at houses around and up to the $700k-750k mark but it all depended on how many bedrooms each house had as the bank would let us borrow slightly more if we had borders with us or could rent out a portion of the house.
"Realistically we could only spend around $550,000 to $600,000."
Karl said they did not have too many must-haves for their first home.
"But there were definitely things we would have loved to have had."
They adjusted their want for a three or four-bedroom home to settling for just two bedrooms but dug their heels in on a nice location to raise their young family.
"We knew that in the current market there wasn't really the option of being fussy, trying to tick all our boxes. It was also going to be unrealistic to get the dream home for our first."
They went to "so many" auctions for houses they thought "looked perfect" and had also put in a few offers on other places.
"There's so much demand that whenever we went to an auction or put an offer on a house that we thought we had a shot at, the bidding would go way beyond what we could afford or the bank would let us borrow, or the other buyers would put in a better offer."
They also had to toss up whether to ditch conditions like getting a builders report, LIMs/property files, meth testing etc to make their offer look more appealing, Karl said.
In January this year, Letesha locked eyes with a small 1970s two-bedroom home in
Tauranga and put in an offer at 11pm on a Friday without Karl even seeing the home.
Their offer was accepted the next morning.
In March, they finally got the keys and celebrated by eating ice cream in bed and binge-watching a television series.
Letesha said it was "so amazing" to have secured the keys to their first home.
"We're loving making changes to the house and making it our own.
"It's nice knowing that all the hard work we put into the property is adding value to our investment and that we are the ones who benefit from it in the end.
"Hopefully, buying a home at such a young age also means we can help our two kids into their own homes one day and set them up for the future."
Letesha said the journey into their own home was a "rollercoaster".
"There were so many times when we thought we were about to get in but then had setback after setback.
"It honestly felt like it was going to be impossible and that we would never reach the goal of owning our first home.
"It was really emotional and hard but now that we are in our first home it is amazing and the struggle has been well worth it.
"We wish it was easier for people to get on the property ladder and into their own homes."
Their advice to other first home buyers was not to give up, get a mortgage broker, and have a clear idea of what you can spend.
"Keep looking until the right house for the right price... the house prices are ridiculous but there are still some gems out there."
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