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Quotable Value area manager Tim Gibson said an increasing number of first-home buyers were looking to Palmerston — as well as Waihola, Milton and Waikouaiti — as rising prices were putting home ownership in Dunedin further out of reach.
"Dunedin’s residential property market is certainly on fire right now, stoked by record-low interest rates, high demand and a low volume of housing available for sale," Mr Gibson said.
"Potential purchasers are finding it really tough to even get an offer considered here these days."
According to new Real Estate Institute data released yesterday, the median house price in Otago last month was $620,500, a 16.7% jump from December 2019.
In Palmerston, a three-bedroom home on a quarter-acre section, with two bathrooms, new decking and a garage, recently sold for $355,000, Mr Gibson said.
A three-bedroom home on a quarter-acre section in Milton recently sold for $400,000, while a modernised three-bedroom bungalow in Waihola, with lake views, sold for $461,500.
"If I was to pick just one of these towns with the most potential to grow, it would be Palmerston.
"It has good schooling facilities, a recently built medical centre, and it’s close to the Macraes gold mine, which is a major employer."
Commuting times and costs had to be factored in if buyers wanted to continue working in Dunedin, but there was certainly "a lot more bang for your buck" in Palmerston.
Waitaki Mayor Gary Kircher agreed.
Palmerston was a town with "so much potential" — and the commute to work in Oamaru or Dunedin would be considered small for a lot of people who lived in Auckland, or even Wellington and Christchurch, he said.
LJ Hooker Dunedin agent Mandy Elliott said there was a lot of interest in the Palmerston area, and not just from Dunedin buyers.
Mrs Elliott, who lives in Palmerston, was getting inquiries from as far away as Auckland, and a lot of OceanaGold Macraes mine employees were choosing to base themselves in the Waitaki town, rather than commute from Dunedin or Oamaru.
House prices in Palmerston had also increased in a big way, Mrs Elliott said.
When she started her career in real estate about six years ago, it was easy to find a house for less than $200,000.
Now, the average price was closer to $350,000, she said.
The number of houses on the market was "steady", but the town could benefit from a new subdivision.
"It would be good to see some new [houses] come into the area."