Market strong before turbulence to come

New Zealand’s median house price was up by 13.7% year-on-year to a record high of $665,000 in March, according to the REINZ data.

Additionally, eight regions – including a resurgent Auckland – also hit record median prices, after double digit annual growth, in March.

In Auckland, median house prices increased by 11.1% to a new record median price of $950,000. That was up from $855,000 at the same time last year, and a $65,000 uplift on February 2020.

The other regions to see new record prices were Waikato, Manawatu/Wanganui, Taranaki, Tasman, Canterbury and Southland.

March also marked the fourth month in a row where every region in the country saw an annual increase in median prices.

However, while price growth remained strong, sales activity nationwide dropped by 4.8% year-on-year.

There were 6,886 sales in March as compared to 7,213 at the same time last year. That was the lowest number of properties sold in the month of March in nine years.

While many regions saw a large decrease in their annual sales volumes during March, Auckland (along with Northland and Marlborough) bucked this trend.

In Auckland, the number of properties sold increased by 10.8% year-on-year from 2,083 to 2,307, which was the highest number of sales in four months.

REINZ chief executive Bindi Norwell says the first quarter of the year saw 2,000 fewer new listings come to the market than the same time last year.

“So when you take that into account, plus the impact of six days of lockdown because of the impact of COVID-19, then it’s understandable why the number of properties sold in March has fallen nearly 5%.

“This is backed up by REINZ’s seasonally adjusted sales volumes figures, which show based on what happened in February we would have expected a much better result in March and this is likely the impact of the lockdown week on sales volumes.”

But, overall, the data shows that before COVID-19 hit New Zealand’s shores, the property market, including - once again - Auckland, was in a strong period of growth.

Norwell says that how big the effects of COVID-19 are is up for debate, but the impact will depend on a huge number of factors.

These include how long the country is in an Alert Level 4 lockdown for, the level of unemployment, consumer and business confidence levels, people’s ability to access finance (and finance their own mortgages) and how long the wider economy takes to recover.

“Property is a long-term investment and the market will recover. However, the question is, how long it takes to recover.”

Going forward, when it comes to sales, they expect people will take a bit of a “wait and see” approach when it comes to listing their property, she adds.

“But for those who have decided after four weeks of being locked in their ‘bubble’ that they don’t like their house anymore, they will be desperate for the chance to move, so there may be some great opportunities for those wanting to buy and sell in the coming months.”

For Kiwibank senior economist Jeremy Crouchman, the REINZ data hints at the impact on the market following the nationwide Covid-19 lockdown.

He says the housing market was building solid momentum in the opening months of 2020, which most likely flowed into the start of March.

“But sales activity looks to have hit the brakes at the end of the month when the lockdown was enforced. Total sales were down nearly 5% year-on-year, but seasonally adjusted sales recorded the largest drop since early 2008 at -16% month-on-month.”

Sales will tumble by a much larger degree in April while other metrics – like house price growth - will also turn in the months ahead, Crouchman says.

“At this stage we are forecasting that house price falls will trough 9% year-on-year down at the end of the year. Job losses and business closures will mount. Vendors needing to sell in this environment will take lower prices, as previously motivated buyers are forced to sit this one out.”

While a 9% annual house price fall would be similar to the low seen during the GFC, moves by authorities to support the economy through the worst of the current crisis are expected to help avoid even larger house price falls, he says.

“Also, New Zealand does not suffer from an oversupply of houses. In fact, we still have a shortage of affordable housing.”