Late last year, the Government brought in changes to the Credit Contract and Consumer Finance Act (CCCFA) with the aim of targeting loan sharks.
Instead, it has caused banks to tighten their borrowing by closely vetting mortgage applicants’ personal spending habits and personal finance.
Corelogic’s latest House Price Index found that Dunedin’s median value decreased by 1% in February to about $707,000, the biggest sign of weakness in the market through the country’s main centres.
Bayleys Metro sales manager Adam Gain said there was certainly less activity, but February was still a good sales month.
Last week, there were more than 600 houses on the market in Dunedin, significantly more than this time last year when there might have been only about 150.
There had also been a slowdown in the sale time, houses taking about 40 days to sell now, rather than 20 last year.
The CCCFA was definitely having an impact, but investors had "completely left" the lower end of the market.
They were no longer looking for established houses; they were looking at new builds which were tax deducible under the Government’s new rules, Mr Gain said.
There was still plenty of interest and activity in the higher end of the property market, he said.
Some buyers had planned to build, but given the situation with a shortage building supplies they were looking at nicer houses.
Late last week, the firm sold two houses in the seven-figure range at auction.
"In that sense, the top end is still on a roll."
Mr Gain expected Dunedin’s housing market to boom over the longer term, especially as more people moved to the city for projects such as the hospital rebuild and the ACC office build.
The Financial Services Council (FSC) released results of a survey of 2000 people on Friday, 68% saying they were worried about house prices and 65% worried about interest rates.
As well as that, 79% of people surveyed were also worried about inflation and 43% were not confident in the New Zealand economy.
FSC chief executive Richard Klipin said after two years of the pandemic, how New Zealanders were feeling about their future was shifting and that was reflected in their concerns about the economy, house prices and interest rates.