An acute shortage of housing in Hawke's Bay is putting people off selling their homes because of the difficulties they're having finding another one, real estate agents say.
Hawke's Bay had the largest drop in the country in the number of houses for sale for the year to June (243 to 187). It's the lowest it's been for the June month for seven years.
The 23 per cent drop recorded by the Real Estate Institute of NZ is having real-life impact.
Reinz Hawke's Bay spokeswoman and Ray White Hawke's Bay director Elanor MacDonald says the region is now facing one of the worst supply and demand issues in NZ.
Median house prices increased 25 per cent in the region across the year to June and Central Hawke's Bay hit a new record median price of $595,000.
MacDonald said Hawke's Bay traditionally has a seasonal market, with a drop in winter but sales off the back of the Covid-19 lockdown, so had been bumped up due to high buyer interest and sales that had been deferred.
Tremains regional manager Stuart Christensen said the previous winter "was like summer every day" as it was not seasonally impacted due to the boom following lockdown.
"There was apprehension coming out of Covid and then it just took off so the seasons you'd historically see just didn't happen, it just drove right through."
MacDonald said the drop down this year could be partly explained by a "bit of a knee jerk reaction" to the Government's housing package announced in March which included changes for property investors and first home buyers, and commentary following this around house prices dropping and interest rates rising.
She said investors in Hawke's Bay weren't selling any of their portfolios and Christensen said part of the lack of supply was because investors were still "taking stock" of the Government's housing changes.
The other contributing factor is the uncertainty of where people can buy if they do sell, he said.
Some sellers are making sales subject to them finding something or they are looking at a long settlement period.
MacDonald said they are seeing more vendor purchase clauses than ever.
"There is certainly a reasonably sized pool of people that if they could buy the house that they actually wanted, their house would be sold."
When it comes to house prices, compared to other areas of the country, Hawke's Bay has "had a little bit of catch up to do" in the past 10 years, which has been happening over the past three years, she said.
"After the GFC [Global Financial Crisis] we saw an initial drop off, then quite a long period of very slow growth whereas Auckland and some of the other centres were really pumping along at a higher level."
MacDonald said she felt it could be a challenging winter for sales, but there are hopes that spring could bring a turnaround.