Tauranga residents are having to spend nearly half of their earnings on mortgaging properties, according to a new report.

CoreLogic's latest report also highlights a decrease in house prices in Tauranga last month, hinting at a potential slowdown in property value growth.

The recent upward momentum in the New Zealand residential property market continued through February, according to the CoreLogic House Price Index (HPI).

The HPI for February 2021 shows nationwide property values increasing by 2.6 per cent. This takes growth in the last 12 months to 14.5 per cent - a rate not bettered since the 14.8 per cent rise in the 12 months to October 2016.

However, the value of properties in Tauranga dropped slightly in February, by 1.5 per cent. The report suggests it is too early to consider this a continuing trend owing to the 6.7 per cent overall growth of the past three months.

The report also suggests Tauranga stands out when it comes to unaffordability of property.

Residents are spending 43 per cent of their average income to service a mortgage. This is the highest amount of the main centres in New Zealand.

With the loan-to-value ratio restrictions officially back in place from the start of the month and further tightening for investors from May, it's suggested that the current rate of property growth will ease over the coming months - as potentially already seen in Tauranga.

'This is especially likely following the Minister of Finance's direction to the Reserve Bank to ‘have regard to the impact of its actions on the Government's policy of supporting more sustainable house prices',” says CoreLogic's Head of Research Nick Goodall.

”While previously the RBNZ Governor, Adrian Orr, has expressed that the Bank has always done so, the latest communication is more explicit with regard to actively contributing to the government's housing policy objectives, namely reducing investor activity and improving affordability for first home buyers”.

Goodall explains further regarding mortgage applications.

'From a nationwide perspective banks have been busy assessing mortgage applications and ordering valuations for properties to lend on, but there are anecdotes of rushed applications to ‘beat the return of LVR restrictions' from banks outside the big four.

'Interestingly, mortgage advisors have stressed the importance of clear communication of the LVR limits as potential would-be buyers are put off due to the perception of requiring a 20 per cent deposit.

'This is because there is an allowance of up to 20% of new lending to be written with less than the standard 20 per cent deposit, as well as there being exemptions to the limits for new builds.”