Rise in house values accelerating

The rise in Napier and Hastings house values is accelerating, according to the QV House Price Index.

Napier values rose 4.3 per cent over the past three months and are up 9.1 per cent year on year. Hastings increased by 2.6 per cent over the past three months and are up 9.6 per cent year on year. The average Napier value is now $358,732 and in Hastings $331,149.

QV valuer Bevan Pickett said there was a shortage of houses for sale compared with demand.

"The Hawke's Bay market remains strong with properties selling quickly. The lack of stock and high buyer demand means multiple offers continue to be common place and some properties barely make it to the market before being sold."

He said out-of-town buyers - including investors and those moving to Hawke's Bay - had forced local buyers into action. "The low to mid-price bracket is particularly active with out of town investors and they are giving strong competition to first-home buyers, meaning those who were previously discerning in their decision-making need to loosen their criteria in order to secure a home," he said.

"Auctions and tenders are becoming more popular as the strength of sale tends towards the vendor and it becomes increasingly difficult to cap an asking price on a home given that values are rising quickly."

Hawke's Bay Property Investors Association vice-president Graham Duff said investors would likely continue buying into the mid and lower segments of the house market.

"Nobody is going to buy an expensive home in this area unless they are looking for long-term capital gain," he said. "Most of the properties our investors own would be middle to lower value."

He said the rising Auckland values meant many house owners were borrowing against their increased house value to invest in the regions.

"The money from Auckland is spilling over and you have out-of-town investors, who probably have the ability to buy because their equity has gone up."

Those areas closest to Auckland have benefited most. Hamilton increased 23.3 per cent year-on-year and Tauranga 22.6 per cent. Since the 2007 property market peak Auckland values have risen 70.4 per cent, compared with Hawke's Bay's 5.8 per cent.

Cashflow positive properties, where the rent covered the mortgage, were becoming rare. Most properties suitable for rental investment received three or four offers. "That was never the case before."