House sales in Auckland have slumped by almost 30 per cent over the past year as tighter lending conditions take their toll on both first-home hunters and cash-starved investors.
The latest round of loan-to-value ratio (LVR) restrictions from the Reserve Bank are affecting investors, but banks have also tightened lending criteria - making it harder for all borrowers to get finance.
Latest figures from CoreLogic show first-home buyers have been hit especially hard.
"We have seen a dramatic drop in first-home buyer activity," said Nick Goodall from CoreLogic.
"There were less than 1280 sales to this group in April and May which is the lowest we've ever seen since 2005, including during the Global Financial Crisis."
CoreLogic figures show the number is down 27 per cent on the same two months of 2016 and down 31 per cent on 2015.
In October last year tighter LVR restrictions required property investors to have a 40 per cent deposit for a mortgage loan and owner-occupiers a 20 per cent deposit.
Housing unaffordability, winter, rising interest rates and uncertainty about the election were other factors in the widespread slowdown, Goodall said.
The CoreLogic buyer classification data showed all buyer groups had been affected - except investors buying with cash.
The LVR requiring investors to have a 40 per cent deposit had reduced the number buying property with a mortgage to 1750 sales in April and May.
"Investors who need a loan have been shut out of the market but cash investors have picked up their share of sales - not first-home buyers or movers," said QV spokeswoman Andrea Rush.
"Cash buyers purchasing property in New Zealand from overseas or new migrants moving with cash reserves often have the advantage over New Zealanders of higher foreign currency exchange and they are not impacted by the lending restrictions."
Rush said because the Government does not accurately measure the number of residential sales to foreign buyers or new migrants there was no way of knowing what share of sales were going to those offshore.
"What we do know is there have been a number of stories reported in the US media including the New York Times since Trump came to power about American buyers wanting a slice of NZ as a bolthole," Rush said.
"And clearly (there are) mainland Chinese wanting to get their capital out of China invest here as well."
The lending restrictions were especially tough in Auckland where the average value was $1.044 million, entry level was considered upward of $600,000 and building costs were rising.
"Even for an entry level Auckland home priced at between $600,000 and $700,000, you still need a 20 per cent deposit, so you have to borrow $500,000 for your mortgage.
She said a new debt-to-income ratio, proposed by the Reserve Bank and under consideration by the Government, would allow buyers to borrow only four times their annual income. "That is going to rule out a lot of New Zealanders earning average wages."
Rush said first-time borrowers were finding it a lot harder to get finance than a year ago.
It was also harder for developers building new homes to get finance, so building had slowed.
"In Auckland where we've had population growth of 44,000 over the past year and need more housing supply, it is especially concerning that building activity and consents are now trending downwards," Rush said.
Reserve Bank figures have also highlighted a big drop in lending. Only $4,555 million was lent in April 2017, down from $6,504m in the same month last year.
Lending to first-home buyers was $630m in April, down from $789m the same time last year.
But Peter Thompson from Barfoot & Thompson said there was still plenty of interest in the market and quality homes were selling well.
The clearance rate at auction was 30 to 40 per cent but Thompson said properties passed in were often swamped with multi-offers soon after.
"The auction process is still bringing people to the market and making a quick sale. It's still our preferred mode of sale," Thompson said.
Tighter lending criteria from banks meant properties were subject to valuations prior to deciding lending.
"People can't go in with unconditional offers straight after the auction. The banks are being a lot more cautious in that what they are paying is not too over the top."
Recent figures from Barfoot & Thompson show the number of sales in the year to May 2017 was down about 3000 on the previous year.
In the 12 months till May the company sold 10,637 properties with a combined total of $9,842,514,160.
The previous year 13,317 properties were sold for a total of $11,193,038,965
Properties for sale were on the market for about a week longer than a year ago, Thompson said.
"Time on market has gone from 31 days to 37 days - during the Global Financial Crisis in 2007 it got to 42 days.
Recent figures from Barfoot & Thompson show the number of sales in the year to May 2017 was down about 3000 on the previous year. (Photo / Chris Loufte)
"We are slowly getting to that stage but the good properties that are priced right will sell."
Thompson said despite a dip in the number of residential properties sold in Auckland in May, prices showed no signs of retreating.
"The average sales price for the month at $942,717, and the median price at $846,000, remained rock solid.
"Those vendors that are achieving a sale are those that accept prices are flat, and are likely to remain that way until the September election is behind us."
Total sales for April and May 2017 Post-LVR: 5736
Investors with mortgage - 1748.
Investors without mortgage - 690.
First-home buyers - 1277
Movers - 1262
Other - 759
Total sales for April and May 2016 Pre-LVR: 8117
Investor with mortgage - 2767
Investor without mortgage - 740
First-home buyer - 1752
Movers - 2062
Other - 796