House prices in a South Island town rose by 13% this year, making it one of a handful of areas bucking the market’s downward trend, Quotable Value says.

The property valuation company’s (QV) latest figures showed prices dropped in each of the 10 biggest cities in the quarter to May, while only Tauranga and Christchurch had not had price declines since the start of this year.

But they also revealed at least 10 towns and areas outside the main urban areas have had price increases of above 5% over the first five months of the year.

The coastal South Island town Kaikoura had the biggest jump in prices, up 13.6% to an average price of $702,130.

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Central Hawke’s Bay, up 11.0% to $732,801; Stratford in Taranaki, up 10.2% to $545,188; Waimate in Canterbury, up 9.5% to $445,852; and Westland on the West Coast, up 9.0% to $425,604 rounded out the top five.

Opotiki and Kawerau in Bay of Plenty, Timaru and Ashburton in Canterbury, and Buller, West Coast also had price increases of over 5%.

QV general manager David Nagel said these areas were exceptions to the general downward trend nationally – for the time being.

Their price increases were slowing and were expected to dip into negative territory in the months ahead, he said.

“Every market is different, and not every market is at the exact same point in its cycle. The main urban centres, especially Auckland and Wellington, tend to be ahead of the regions in terms of peaks and troughs.

“But they are all facing rising interest rates and tightening credit conditions, which is greatly inhibiting price growth and market activity.”

The only main urban centre where price increases had picked up on a monthly basis was Queenstown, where they were up 4.5% over the three months to May.

Queenstown was not as far along in the cycle as the other main centres, and Nagel said its prices were also expected to taper off and decline in the months ahead.

On a regional basis, Canterbury and West Coast had the biggest price increases since the beginning of this year, at 2.6% and 4.6% respectively. In contrast, prices in Auckland and Wellington were down by 3.8% and 4.9%.

Nagel said returning Kiwis and former city dwellers seeking a different lifestyle or more affordable housing in the regions had been one driver of price increases in recent times.

People moving to the regions could also be one reason that many of these places had so far managed to dodge the downward trend occurring elsewhere, he said.

“But rising interest rates and tightening credit conditions will almost certainly curb future growth in these regions eventually, as they have almost everywhere else.”

The writing was on the wall for property owners everywhere, he said. That meant it was just a matter of how far prices would eventually fall before they found a new equilibrium.

Property investor David Whitburn said cashed up expats buying in the regions might be a factor in some small towns continuing to record price increases, but it was not the main factor.

In previous property cycles prices had kept increasing in regional towns for about a year after they started falling in the main centres, he said.

“This cycle is a bit different because funds pumped into the economy due to Covid have prolonged the boom, but it’s likely the same thing will happen as in previous cycles.”

There was usually a ripple effect with price decreases in the main centres spreading to regional towns after a bit of a lag, he said.

Prices in the Auckland and Wellington regions were down 13.5% and 13% from their peaks in November and October, according to the Real Estate Institute’s latest house price index.

And ASB and Westpac have predicted prices could drop 20% from their recent market peaks, when adjusted for inflation.

But prices were estimated to have increased by about 45% over the course of the pandemic, which meant most homeowners were still sitting on sizable capital gains.