Rotorua's median house price has reached a record high for the third consecutive month as people make a "mad scramble" to buy property for fear of missing out.
REINZ figures released yesterday reveal the new median house price in Rotorua was $580,000 in October, soaring nearly $100,000 from $485,000 in October 2019. Of that, $60,000 came in the past month alone. It is the third month in a row the city has broken a price record.
In the wider Bay of Plenty, the median house price increased 16.2 per cent to a record high of $720,500.
REINZ regional director Neville Falconer said the Bay of Plenty figures also showed sales volumes increased 6.1 per cent to 576 when compared to the same time last year.
However, demand continued to outweigh supply with new listings down -7.3 per cent year-on-year which continued to put a strain on stock levels, Falconer said.
"The Bay of Plenty region is now at its lowest level of inventory since records began with seven weeks available, down from 15 weeks at the same time last year. These levels of activity are expected to continue over the coming months."
But the low levels of stock are being met with unprecedented demand, as property experts warn of fierce times ahead.
OneRoof editor Owen Vaughan said the Reserve Bank's Wednesday announcement of potentially bringing back loan-to-value-ratio restrictions (LVRs) in March was "pretty much like putting petrol on the fire" as people race to secure property before then.
"You can be sure house prices will steadily climb and competition get fiercer. That's going to be pretty sharp for first home buyers in the Bay of Plenty area, especially in areas where investors have started to come back to the market."
Vaughan said he expected the next few months would become "real intense".
"The figures really show the boom is here. There just doesn't seem to be any slowdown. It's going to be a free-for-all in summer."
Managing director for Realty Group Ltd, which operates Eves and Bayleys, Simon Anderson, said the frenzy was already here.
"In my career in real estate of 20 years, I've never seen - right across the residential market and lifestyle - where there has been so much demand in the last six to eight weeks. There are so many buyers and so many have missed out and so they are more aggressive in trying to get the next one.
"The challenge we've got is it pushes it further away from the hopeful home buyers who haven't [found a property] yet but also this is not unique to the Bay of Plenty. It's happening across New Zealand at the moment."
Anderson said he believed the demand and the spiralling prices would continue into the New Year.
"There's no shortage of buyers. Providing there's stock, obviously, the market will carry on. Whether it's sustainable, there are questions around that."
Anderson said he believed the demand was partly stemming from people seeking security amid Covid's impact on the world through bricks and mortar property, "the old, traditional Kiwi way".
Another factor was Covid prompting many New Zealanders to return home, needing a place to live, while others chose to invest in property thanks to low-interest rates rather than through other options.
First National Rotorua and REINZ spokeswoman Ann Crossley said the new median house price for the city was "phenomenal".
"If you look at the last 40 years of statistics and cycles, there has always been this cycle. But this one feels hotter and mainly because we've had such a bizarre year, it just fits.
"I think a lot of people, because of Covid, have looked at themselves and looked at their lifestyles and looked at what they want in life and maybe made some changes."
Crossley said low-interest rates meant that for some people it was not worth having money in the bank so they chose to invest in property instead.
Covid's impact on housing, through homeless and emergency accommodation at local hotels and motels, also meant more demand for private accommodation such as Airbnb which helped to drive up house prices, she said.
"It's kind of like a perfect storm."
Professionals McDowell Real Estate Rotorua owner Steve Lovegrove said that as soon as houses came on the market, they went.
"We used to have the situation where we would have 20 homes and one buyer but now it's 20 buyers for the one house on the market."
Lovegrove said the demand was "the culmination of many, many years where the population has outgrown the number of houses".
"That is just exploding to a level where people are forced into a position of paying additional money for a house, which they might be okay with right now because the cost [of borrowing] is low but people are going to have to pay that debt back," he said.
Tremains Rotorua sales manager Megan Davies said she did not expect prices to drop anytime soon, if ever.
"I think what we are seeing a slight adjustment to New Zealand levels. Rotorua has traditionally been good value for money."
Davies described the demand within the past month as "a mad scramble to buy property at any price".
"There's a shortage of stock and a real fear that people will not get into the market.
"We are seeing properties that are selling well above our appraised price."
Davies said Tremains was now moving to a "no price strategy" because the rapidly changing prices made it challenging to appropriately appraise properties. Homeowners were encouraged to sell via auction or price by negotiation.
Harcourt Rotorua sales manager Colville Barbour said he was not surprised at the increase as "it's been pretty frantic since lockdown".
"We don't see this stopping. Interest rates are so low ... with the continued shortage of stock and the demand that's still out there."
Tauranga also recorded a record high median price, reaching $810,000 in October against $687,400 the year prior.
Western Bay of Plenty recorded a median house price of $730,000, down from $770,000 in September 2020 but still up from $561,000 in October 2019.
Advice to hopeful homeowners
You need to research and understand the market you are dealing with. If you can find parental support or pair up with a friend to buy a property together, or it may have to be you look to an area with a lower median sale price and buy in that area. That enables you to get onto the property ladder.
– Simon Anderson