Tighter lending restrictions means more "heartbreak" for home buyers who are seeing sale and purchase agreements on a new house fall over at the last minute when they are unable to get finance.

Sales nationwide have been sluggish, listings are down and sale times have been extended, says the head of one of the country's larger real estate firms - Century 21.

Meanwhile, anecdotally the property market has seen a rise in the number of Kiwis unable to go through with a conditional offer on a house as lenders err on the side of caution and refuse finance.

National manager of Century 21 New Zealand, Geoff Barnett, said there seemed to be a "new wave of lending caution" from banks and financial institutions that saw many deals fall over at the last minute.


"When it gets down to the nitty gritty of a sale, more lenders are then insisting on getting the likes of valuations done and getting much closer scrutiny to mortgage serviceability."

Barnett said it was "heartbreaking" for buyers, vendors and agents alike" when finance falls over.

However he said given the international uncertainty and how the country's property market had settled, the heightened caution was understandable.

Nevertheless Barnett was confident the summer season would see things pick up - albeit in a more settled manner.

"What we're now witnessing is a more normalised market showing more realism and genuine sustainability than the crazy days of a couple of years back."

Mortgage adviser Bruce Patten said the recent changes to the loan-to-value (LVR) ratios was the main reason more were struggling to get finance.

The changes saw most people need to front up at least 20 per cent of the purchase price to get a mortgage in an effort to help dampen sky-rocketing house prices.

Patten had seen a small rise in the number of Kiwis having finance declined. However it wasn't very often because a lender had simply changed its mind on a loan pre-approval.


He said it was more likely that potential buyers had not actually been given a pre-approval in the first instance - in particular those with a smaller deposit.

"It revolves predominantly around people with less than a 20 per cent deposit, because the banks have got such a shortage of funding available because of the LVR restrictions.

"A lot of the time if somebody goes into the bank, the bank can't do a pre-approval until they have a physical contract. So what they are maybe doing is giving an indicative approval."

He said it was often once a contract was given to the bank that the finance side fell over.

Patten said the reasons banks or lending institutions declined finance at this stage was often due to a prospective buyer's income situation, or issues with the house that voided the insurance required to get finance.

Despite this Patten said the numbers of Kiwis who were unable to go through with a sales and purchase agreement due to financing falling over was still relatively small.

No official figures were available on this, but Patten estimated it had risen by about 2 per cent.

"It might have been 1 to 2 per cent, but now it might be 4 to 5 per cent, we aren't talking every contract."

However, Patten said this was unlikely to have impacted the recent slowdown in property sales over the winter and pre-election period.