Napier has no suburbs with average house price under $500,000

A view over Napier which now has no suburbs with an average house price under $500,000, according to a report. Photo / Warren Buckland

It is now tougher for first-home buyers to purchase a property in Napier than at any other stage in recent history, according to a new report.

A OneRoof real estate report released today shows that Napier has no suburbs with an average house price below $500,000 - down from five suburbs in that price bracket two years ago.

"Our research shows there are just 396 homes in the city that are in that sub-$500,000 bracket, down from just over 6200 homes in 2020 and 18,000 in 2014," OneRoof editor Owen Vaughan said.

Meanwhile, the wider Hastings District had only three suburbs in the sub-$500,000 bracket at the end of 2021, including the rural areas of Putorino, Te Haroto and Tarawera.

It has put a question mark over whether the Government should raise its price cap for the First Home Grant scheme, which stipulates a first-home buyer is eligible for a grant up to $10,000 only if they purchase an existing home for less than $525,000 in Napier or Hastings.

OneRoof's report has focused its research on house price inflation between January 2020 and January 2022.

It shows a sharp decrease in the overall number of New Zealand suburbs with an average property value less than $500,000, from 975 to 434.

That boom has had a big impact on Napier.

The number of sub-$500,000 suburbs in the city dropped from five to none during that time, and the number of $1m-plus suburbs jumped from zero to nine (48 per cent of the city), according to the report.

The research has been carried out by NZME-owned property listing site OneRoof.co.nz and its data partner, Valocity, and shows affordability is eroding even in the city's cheapest suburb of Maraenui.

The average property value in Maraenui has risen from $360,000 to $619,000 in the past two years.

A big shift in the real estate market during the past three months has seen house price increases come to a sudden halt, with far fewer homes being sold across the region.

There has been a big change in the market in recent months with less homes selling in Hawke's Bay. Photo / NZME

However, while that may sound like welcome relief for first-home buyers, tough lending criteria and high interest rates are making it extremely difficult for many people to get a home loan.

Vaughan said the research highlighted the growing inequality in New Zealand's housing market.

"The housing frenzy of the last two years, fuelled by low interest rates and FOMO (fear of missing out), has radically altered the landscape for buyers and sellers," he said.

"Maraenui, one of lowest income areas in Hawke's Bay, saw 71 per cent increase in house prices.

"That puts real pressure on first-home buyers and in effect shuts many locals out of the market."

Eligible buyers can access a Government grant up to $10,000 to get into their first homes.

However, they must buy an existing home for under $525,000 or a new home for under $600,000 to be eligible, with the last increase to that price cap coming in April 2021.

"As part of these changes [in April 2021] the house price cap in Napier City increased from $400,000 to $525,000 for existing properties and $500,000 to $600,000 for new build properties," a Ministry of Housing and Urban Development spokesman said.

He said a review into the price cap had just been completed but no changes were in the pipeline at this stage.

"The Minister [of Housing] is currently considering the results from the review."