Market teeters on cliff edge - QV
Wednesday 3 June 2020
Signs of fragility might be present in the post-lockdown market yet value growth and demand are currently still going strong.
By Miriam Bell
The latest QV House Price Index has the average national value up by 2.4% over the past three months and by 7.7% year-on-year, leaving it at $739,539 in May.
In the Auckland region, values also increased. The region’s average value was up by 2.7% over the last quarter and by 5.4% year-on-year to hit $1,086,223.
In a similar vein, markets around the country saw value growth of varying degrees annually. Most also saw some growth over the past three months – but it was negligible for some.
That means that while Hastings had 4.6% and Whangarei had 4.4% quarterly growth, Queenstown Lakes had just 0.5% and Rotorua’s values remained flat on 0.0% over the quarter.
However, QV general manager David Nagel says the data is skewed towards the earlier stages of the three-month period when sales volumes were much higher.
“When we look at just the April and May transactions in isolation it shows a definite impact with post lockdown sales on average down by around 5% on pre-lockdown levels.
“As we expected we’re seeing regional variations as the various locations are impacted differently, depending on their reliance on tourism and other employment impacted by Covid-19.”
The key point to take from the data this month is the gradual decline in quarterly growth in May, with 14 of the 16 major cities monitored showing a reduction in the rate of growth since April, he says.
“This trend is likely to continue as a greater proportion of post-lockdown sales are used in the HPI calculations.”
The move to alert level two provided an opportunity for the real estate business to get back up and running and the early post-lockdown signs have been positive, with a shortage of listings helping to maintain a level of scarcity for buyers.
But Nagel says the May bounce in sales volumes was likely the result of pent up demand from six weeks of lockdown.
“We’re now seeing buyers exercising caution with many expecting greater volumes of listings to come on stream later in the year as the full impacts of the economic downturn start to bite.”
Despite this, QV consultants around the country are reporting that they are still seeing strong demand for well located, affordable properties that are attractive to both investors and first home buyers.
Nagel is not convinced this will last though. That’s due to a major shift in the market fundamentals – particularly the increase in unemployment and the loss of high net migration for the foreseeable future.
He says the data is still sketchy, but he is confident the market has already come back from the value levels seen in February and March, particularly in some high-risk locations that previously experienced sustained periods of value growth.
“What we don’t know yet is the quantum of correction that the market can expect to see as the economy transitions post-pandemic.
“Over the coming months we’ll likely see more listings gradually coming on stream after the cushioning effect of the Government wage subsidy comes to an end and bank mortgage holiday periods expire. Unfortunately, this will be when the full impact of the pandemic will be reflected on real estate values.”
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