Investors and first-home buyers seeking a bargain as tighter lending restrictions hit home in Auckland are fuelling Rotorua's property market, but the growth is putting squeeze on renters.
Rotorua Photo: 123rf
The popular tourist town topped the Quotable Value (QV) list of fastest growing property prices in the past 12 months with values soaring 27.8 percent to an average price of $396,423.
That is an increase of 35 percent since the last market peak in 2007.
Prices in the town have been climbing solidly for the last 18 months, since new lending restrictions started hitting home buyers in Auckland, QV spokesperson Andrea Rush said.
"That's when we saw Hamilton and Tauranga values rising and when some people got priced out of that they started looking further afield, and Rotorua was a popular choice."
Harcourts real estate agent Hielke Oppers has sold properties in the town for more than a decade.
Investors and first-home buyers seeking were being attracted to the town by its affordability, he said.
"In 2015 we ended up getting a lot more people with KiwiSaver applications to get into their first home, so that has contributed hugely. But the other factor is the rental return in Rotorua is very good so there's real good cash flow for investors."
New Zealand Property Investor magazine publisher Philip Macalister, who lived in Rotorua, had long predicted the boom coming to his hometown.
"It's not just that houses are already cheap, we've got population growth, we cracked over the 70,000 mark recently. The council's getting their act together and there are some good economic developments going on."
However, there was a shortage of houses, which was putting pressure on the rental market, he said.
With rentals increasingly hard to find, Rotorua mayor Steve Chadwick said there was growing interest in subdivisions and new property developments in the town - and there were plenty of jobs, too.
"Oh yes, there's definitely jobs. Trade, services, hospitality and particularly tourism and retail."
Local recruitment agencies were busy and job listings were up 16 percent on last year, Ms Chadwick said.
Rotorua mayor Steve Chadwick Photo: Rotorua Lakes Council
While the average price of a property in Auckland was $1,043,830, Rotorua has had its share of top-end sales too.
In the six months to the end of March, seven homes passed the $1 million mark, including one that sold for $1.5m.
However, Ms Rush said the latest monthly figures showed Rotorua might already be coming off the boil as house hunters looked even further afield for a bargain.
Opotiki, Gisborne, Kawerau and Whanganui had all experienced strong house price growth recently.