Northland's house prices stop rapid rise as interest rates bite

Langs Beach is still Northland's most expensive suburb, with an average price of just over $2.4m. Photo / Michael Cunningham

Northland's property market has cooled off amid rising interest rates, cost-of-living pressures and strict lending rules.

The average house price in Northland rose by just 1.4 per cent in the three months to the end of May, to $919,000, but fell in many suburbs and towns, according to the latest OneRoof-Valocity house price report.

Real estate agent Paul Beazley, of Harcourts Whangārei, said prices had definitely stabilised.

"Deals are being done but they're just harder to negotiate. Sales are taking longer to put together.

"But the other side of the coin is I think vendors are starting to understand the market a little bit better now."

The rise in interest rates, the economy and banks' reluctance to approve mortgages had all affected the housing market, Beazley said.

"It hasn't crashed, I don't think it's going to crash. I genuinely think what's happening in the market is a reflection of the fact that people are being more cautious.

"And the banks are definitely having an influence over who can borrow and who can buy."

The average price in Kaipara rose by 2.6 per cent to $1.009m, the highest in the region, while prices in the Far North went up just 1.1 per cent to $803,000.

In Whangārei, the average house now costs $976,000, an increase of 1.7 per cent.

Avenues, Horahora, Onerahi, Parahaki, Regent and Tikipunga all experienced price drops, as did Ahipara, Kaikohe and Paihia in the Far North.

Prices rose in every part of Kaipara, with houses in Mangawhai rising 6.4 per cent.

The previous OneRoof-Valocity house price report, released just a month ago, showed a 5.8 per cent rise in Northland, the highest in the country.

James Wilson, head of valuations at Valocity, said interest rates played a key role in the slowing of the market.

"Throughout the summer period buyers were frustrated by how much they were allowed to borrow as a result of the Credit Contracts and Consumer Finance Act (CCCFA), but they are now more likely to be worried about their ability to pay back their debt on higher interest rates.

"It's likely, in this environment, that the flagged reversal on the CCCFA changes will have a much lower impact on buying activity."

Sandeep Maisuriya from Zest Brokers. Photo / Michael Cunningham

Mortgage broker Sandeep Maisuriya, of Zest Brokers, said he has had more enquiries from potential first home buyers since prices flattened.

"I think the biggest change has been people who have already had approval recently, in the last two months or so, who were not able to buy have now been able to close a deal."

Falling prices have also made a difference to buyers who were previously just short of a 20 per cent or 10 per cent deposit, Maisuriya said.

Like Wilson, he doubtfed the upcoming CCCFA changes would make a big difference to lending as banks were already starting to change the way they implemented it.

OneRoof editor Owen Vaughan said negative equity may be an issue for some in the current market.

"The biggest concern for those who bought at market peak is whether or not their property is worth less than what they paid for it," he said.

"For those who plan to be in their home for a long period and can repay their mortgage, negative equity won't be a pressing issue, but rising interest rates and cost-of-living pressures will put the squeeze on homeowners. The safety valve of being able to sell in a rising market is no longer there."

Prices across Northland are still up 22 per cent from June last year, the report noted, despite declining growth over the last three months.

"Many of the areas in trouble now experienced significant growth over the past 12 to 18 months, and even with prices falling are likely to be still well ahead of where they were two years ago," Wilson said.

Across New Zealand, prices fell by 0.9 per cent, with slight increases in Bay of Plenty, Gisborne, Taranaki, Tasman, Marlborough and Canterbury.

The biggest price falls in the country were 2.9 per cent in Wellington and 2.2 per cent in Auckland.