First-home buyers are starting to trickle back into Rotorua's property market as the median house price falls for the second month in a row, according to a new report.
But the need for more housing in the district has become urgent.
Local real estate agents say Rotorua is desperate for more new builds and developers working in partnership with Kāinga Ora is the "perfect solution".
Real Estate Institute of New Zealand's latest report showed Rotorua's median house price has continued to drop, down 6.2 per cent - or $43,000 - to $647,000 in the month to May.
REINZ chief executive Jen Baird said for quite some time agents had reported sparse numbers of first-home buyers in the market.
"Only now are they beginning to reappear, albeit in low numbers."
Baird said the Government's Budget 2022 announcement last month to lift the eligibility price cap for a First Home Grant and remove caps for First Home Loans was welcome news for first-home buyers.
The new price cap for using a grant to buy an existing or new home in Rotorua has been raised to $525,000, up from $400,000 (existing) and $500,000 (new).
The May data showed 22 per cent of sales in Rotorua were at or below $525,000.
"Time will tell whether these changes will result in more first-home buyers entering the property market.
"Many of the properties in this price range require deferred maintenance — a liability to banks when assessing lending."
The report said almost 10,000 new homes were needed by 2050, according to the Rotorua Lakes Council, as the population continued to swell towards an estimated 90,600.
Additionally, some tourism accommodation was being used as emergency housing.
To help meet the urgent need for more housing, Kāinga Ora bought a build-ready subdivision in Pukehangi and was in discussions with the council about buying some city reserve sites for more housing.
A District Plan change to allow for more intensification was a priority for the city, but how long it will take to meet the need for more housing remained a concern, the report said.
But Rotorua Professionals McDowell Real Estate principal Steve Lovegrove said Kāinga Ora was not the saviour of the city's housing situation.
Lovegrove said there was a strong appetite for developers to buy and develop land, which they could do in partnership with Kāinga Ora and KiwiBuild.
"That is the perfect solution."
Lovegrove also said the council needed to put "mighty amounts" of resources into the consenting process to speed it up and "cross some bureaucratic barriers quickly".
In his view, it was a "social disaster" to put back into place age-old social housing areas because it banished generations to social dependency.
"There [are] no examples in the world where there is a large housing estate that has done any benefit for future generations.
"We do need housing urgently but we should not provide cheap houses quickly. That is going to create a 30-year problem. A house is not built to resolve today's housing problems."
Harcourts Rotorua director Wayne Pamment said the city had very low levels of new builds and infill over many years compared to other cities and regions.
"We are desperate to see higher volumes to attract new people to our region."
Pamment said no one really knew how long prices would continue to drop.
"But once the buyers have greater confidence in the ability to [obtain] funds (CCCFA) and stabilisation of prices/value they will start to transact again and we will enter a more stable market.
"Price drops really just cause buyer anxiety of overpaying on a sliding price market.
"We are starting to see better activity with investors as more stock comes to the market that shows good returns as rents are still holding up."
First National principal and Rotorua REINZ spokeswoman Ann Crossley said some first-home buyers had returned to the market but not at the levels they were before.
Crossley said there were 14 sales below $550,000 since the price caps were lifted.
"But the cap is set at $520,000. So all of those people will not have been first-home buyers."
Without first-home buyers and investors creating opportunities for second- and third-home buyers, the top end of the market would also dry up, she said.
Crossley said in her view the estimated 10,000 new homes needed by 2050 was an understatement. She said a new lifestyle village being built in Pukehangi was great but more were needed as there was a lack of suitable housing for elderly people.
Many Rotorua residents had moved to Tauranga in search of lifestyle villages to reside in, she said.
Ray White Rotorua business owner and principal Jacqueline O'Sullivan said the first-home buyer market was trickling back, albeit slowly.
One of their main hurdles was lending restrictions, she said.
O'Sullivan said there was high demand for quality new housing in Rotorua.
More housing will have a positive effect on the market and would free up many existing homes on full sections, she said.
"There is also still a demand for existing family homes on full sites."
Kāinga Ora Bay of Plenty regional director Darren Toy said it was working at pace to deliver more public housing to meet the pressing need facing whānau and tamariki in the city.
Toy said the first of 340 homes under construction or planned in Rotorua would be ready at the end of this month.
"We are also progressing commercial partnerships with developers who will build homes for us, as well as exploring land lease opportunities."
He said 35 buyers had already moved into Kiwibuild homes in the Mountview Green development and more would follow.
"We are absolutely pulling out all the stops to help provide quality homes as quickly as we can, working alongside a range of partners, and also recognise the significant role private developers play in bringing on more housing to the wider market.
"Having a place to call home gives people opportunity, stability and a base to grow as part of a wider community."
Rotorua Lakes Council deputy chief executive for district development Jean-Paul Gaston said the district plan change mentioned in the report related to Rotorua's inclusion in the national Medium Density Residential Standards, will take effect from late August.
"There will be no requirement for resource consent for up to three units on a site – these will go directly to building consent. Rotorua's inclusion ... gives us the ability to fast-track housing solutions as it fundamentally changes and speeds up the consenting process."
In response to Lovegrove's comments, Gaston said the council had increased resourcing for consents and improved its processes.
"We meet regularly with consultants and developers and continue to use consultants to assist with the workload, which has increased significantly since 2019."
He said the council was responsible for ensuring requirements set in legislation were met.
"We endeavour to work collaboratively with developers and their agents to ensure as smooth and timely a process as possible and rely on good information up-front to achieve that, which is why we encourage people to engage with us before lodging their applications."
As at the end of May, building consents issued for new dwellings were 15 per cent higher than this time last year, and subdivision consents were up 135 per cent.
"The number of building consents issued has risen significantly since 2019 when we passed our previous maximum (approx. 245 in 2007)," Gaston said.
"Numbers have continued to increase and last year just under 400 consents were issued."
Regarding the "social disaster", he said Kāinga Ora was trying to distribute housing as widely as possible across Rotorua, depending on the availability of suitable sites.
May's spotlight on the Bay of Plenty
- The median house price increased 10.7% year-on-year, to $905,000
- Sales counts decreased -31.5% compared to this time last year
- Properties are spending longer on the market — the median days to sell increased by 20 days year-on-year from 31 days in May 2021 to 51 in May 2022
- Inventory levels increased 147.7% year-on-year, and new listings by 20.8% year-on-year
- The top sale was $8,220,000 in Mount Maunganui
- An annual increase of 8.6% on the REINZ House Price Index to 4,249
Source: Real Estate Institute of New Zealand