Palmerston North property prices skyrocketing

While the property market is cooling in Auckland, there is one region that's bucking the trend.

Properties in Palmerston North have shot to their highest median prices in 20 years.

Whether it's a first home or a new family home, buyers are having to dig deeper than ever.

James Waldron moved to the city four weeks ago. His family is still in Europe waiting for him to buy a house - but it's not easy.

"I'm struggling mainly partly because I'm coming from overseas, partly because of market dynamics of supply and demand are just out of whack. It's been a real struggle to find something good."

Last month the median price in Palmerston North hit a record of $385,000.

"I went to an auction last week… 20 people bidding and it was sold to an overseas bidder over the telephone. It's really a challenge."

In 29 years in the market, real estate agent Andy Stewart says he's never seen anything like it.

The problem is a shortage of supply.  It's being driven, he says, from the bottom up.

"People who've had their mortgages approved, with a 20 percent deposit, are now in a position where they buy and they've flooded the bottom end of the market and that's caused a roll up effect throughout the market."

The median house price in the Manawatu and Whanganui region is up 19 percent against August last year.

But according to the Real Estate Institute, LVR restrictions mean there are 30 percent fewer investors in the market.

Mr Waldron says he under-estimated the market.

"That was my perception when I moved to Palmerston North, it would be relatively easy to find the right place. I have a healthy budget, I thought it would be easy, but unfortunately there are a lot of people chasing those same properties."

Real estate agents The Property Brokers told Newshub home owners simply aren't trading up - they're hesitant to list to sell, because there's very little to buy - giving those new to the market very few options.