Property prices in Auckland's less-favoured suburbs are catching up as home-buyers are looking at properties in less expensive suburbs in a bid to get on the property ladder.

Experts say the city is seeing a "spill-over effect" and the loan-to-value ratio (LVR) caps introduced last year are driving demand for homes in suburbs not traditionally sought-after. “People who still wanted to buy houses and didn't have large deposits would have to go to suburbs where the properties were favourably priced," said NZ Institute for Economic Research principal economist Shamubeel Eaqub.

LVR mortgage lending restrictions, requiring most home-loan borrowers to have a 20 per cent deposit, were introduced on October 1 because of concern that rocketing house prices in Auckland and Christchurch could cause financial instability.

The rise in property prices was also being driven by strong economic growth in Auckland and people moving to take advantage of low interest rates before they went up.

QV figures showed the biggest rises were in areas such as Papakura and Manukau.

Source and full story: NZ Herald