Tauranga City's property market is starting feel the heat of new home loan lending restrictions, with a drop in buying demand and listings on the back of another climb in house prices.

Quotable Value's latest monthly figures show the average current value in Tauranga of $439,974 is increasing slowly with a 3.8 per cent rise in values since January 2013, along with a slight one per cent increase in the last three months.

QV valuer Richard Allen believes in Tauranga the LVR restrictions seem to be taking hold, with signs of there being less demand from buyers and also a lack of supply with less listings on the market.

'Values are remaining up, which is likely to be due to the lack of supply rather than due to high demand. First home buyers particularly seem to be struggling with this new environment,” says Richard.

Nationwide values have increased 9.6 per cent in the last 12 months and 2.2 per cent in the last three months – now sitting at an average of $469,499. This means vales are up 12.8 per cent since the 2007 market peak change.

When adjusted for inflation, the nationwide annual increase drops slightly to 7.9 per cent and values remain below the 2007 peak by 2.8 per cent.

'The January index shows that nationwide values increased by 0.3 per cent compared to December, while a month earlier the increase was 1.3 per cent. So while values are still increasing, the rate of this increase has slowed considerably,” says Jonno.

The pattern of slowing value is evident not just in Auckland but in other main centres too – to the point where values are either flat, or have slightly decreased in the past month, says Jonno.

'While this is the first month that values appear to have slowed, and generally we would wait for subsequent months before claiming a trend, the timing does align to the LVR speed limits.

'These speed limits have reduced the number of first home buyers active in the market, but perhaps more importantly have led to increased caution amongst buyers. This caution is offsetting any potential upward pressure on prices, due to the lack of listings in many areas.”

Jonno says there is widespread expectation the LVR speed limits will slow down value increases, at least temporarily. But he says QV did not expect values in Auckland to slow as they have – given the supply demand imbalance – and the company also expected other parts of the country, particularly provincial and rural areas, to be hit harder by the LVR speed limits.

'The predicted increase in mortgage interest rates in the near future is likely to slow down values further. This may, in fact, already be affecting buyer confidence and contributing to the slowing we are seeing.”