Soaring house prices across Northland due to demand are forcing first home buyers to adjust their expectations and look at buying in suburbs they previously would not have considered.
Figures from CoreLogic shows the Whangārei suburb of Raumanga recorded the highest percentage increase in house values last year at 17.7 per cent, followed by Ruawai in Kaipara (16.2 per cent), and Kensington, Whangārei, (15.9 per cent) coming in third.
The average house value in Whangārei at the end of last year rose to $627,357— an increase of 14.4 per cent in 12 months.
Machine operator Cecilio Martinez and wife Grace bought a three-bedroom house in Murdoch Cres, Raumanga, in July last year and said although parts of the suburb could be considered undesirable by some, it was still a good place to invest in.
"Pockets of Raumanga have a bad name but there are areas that are good and home buyers need to take the risk if they are to get on to the property ladder. They just have to be careful of who's around," Martinez said.
The couple bought a former state house in nearby Fairburn St just over 10 years ago and decided they needed more space to accommodate their son, his wife and their baby.
That house is now mortgage-free and they haven't decided whether to sell or rent it once renovations are complete.
General manager of Eves Whangārei Paul Beazley said the residential housing has become so competitive that first home buyers were having to compete with investors.
"It's the affordability factor that's pushing first home buyers to areas like the Avenues, Horahora, Raumanga and Tikipunga."
In January last year, he said about 900 houses were listed for sale in Whangārei but that number dropped down to between 490 and 500 at present.
CoreLogic head of research Nick Goodall said Raumanga has become more popular with first home buyers who accounted for 41 per cent of sales last year compared with 36 per cent in 2019.
That equated to 35 first home buyers out of 87 houses sold in Raumanga last year.
In the year before, 45 out of 126 that bought in that suburb were first home buyers.
"This may simply reflect buyers having to adjust their expectations to get into the market, so buying in places they previously wouldn't have considered," Goodall said.
In general, he said greater growth has been experienced in the lower value parts of the country as higher demand for properties forced prices up.
"Greater demand at the lower end of the market tends to happen to property being more accessible to a larger pool of buyers like investors and owner occupiers, particularly first home buyers, thus increasing competition.
Last year, 222 less houses were sold throughout Northland compared with the previous year when 1227 residential properties were sold.
There were more than 1000 residential properties listed for sale on OneRoof.co.nz, 1404 on realestate.co.nz, and a further 666 on Trade Me, as at midday yesterday.
The latest CoreLogic property report said areas with a lower average value such as Raumanga typically meant a greater number of eligible buyers and hence more competition leading to stronger growth.
A rapid rate of capital gain, record low mortgage rates and tight inventory have seen demand outweigh supply, it said.
Stronger than forecast economic conditions have buoyed consumer sentiment at a time of unprecedented global uncertainty, CoreLogic said.
"Later in 2021 the potential flow-on impact of such strong growth will eventually be outright unaffordability reducing the pool of buyers able to borrow enough to participate in the market.
"At this point there will need to be an adjustment of expectations from both vendors and buyers, but with a full pipeline of buyers right now, and a lack of attractive wealth generating alternatives out there, this point looks some way off."
The loan-to-value ratio (LVR) restrictions, CoreLogic said, were scheduled to return on March 1, but with the impact likely to be limited, restrictions may be tightened further that could potentially require property investors to have a 40 per cent deposit.
"Without any major policy change regarding property in the works, the long-term affordability of the property market is reliant on significantly increasing supply, which is a slow moving factor.
"So for now, all indications are that the fervent growth in property values will continue throughout the summer at least."