Market feels Covid-19 impact

Monday 15 June 2020

Covid-19 is still impacting on New Zealand’s housing market but there’s some positive signs in REINZ’s latest data, with a clear monthly increase in sales.

By Miriam Bell

Sales volumes nationwide were down by 46.6% year-on-year in May, as alert level three restrictions continued to restrict sales.

However, there was a strong monthly uplift with sales nearly trebling from April to May. They rose from 1,371 to 3,990, which is a 191.0% increase.

There were no regions which saw annual increases in sales in May, but all regions saw sales volumes increase from April.

In the country’s biggest market, Auckland, sales were down by 44.5% year-on-year (from 2,013 to 1,117) in May, but were up by 98.8% on April

REINZ chief executive Bindi Norwell says the annual decrease in sales is not surprising given the alert level three restrictions were in place for the first 12 days of May.

“These restrictions meant only two property viewings, per property, per day were allowed, making it difficult to get interested parties through a property in a timely and efficient manner.”

None the less, she is pleased that some real estate activity was able to go ahead as it helped start to get the market returning to a sense of normality more quickly.

She says it was a positive sign to see a good uplift in sales activity from April to May, with 15 out of 16 regions across the country seeing triple figure percentage increases in their month-on-month sales activity.

“We’re still seeing a shortage of new listings come to the market which continues to impact sales volumes. Hopefully, as people’s confidence starts to lift the listings shortage will start to change.”

While sales appear to be on the rise, the data on median prices was more of a mixed bag.

Nationwide, median house prices rose by 6.9% year-on-year to $620,000 in May, as compared to $580,000 in May 2019.

In Auckland, there was an annual increase of 7.1% in median house prices in May. That took the median to $910,000, which is the third highest price on record.

Eleven out of the 15 regions saw monthly increases in median price, with Waikato, Taranaki and Tasman all hitting record median prices in May.

Norwell says May’s price data was slightly more reflective of a global pandemic, in that there was some volatility in prices with five regions seeing prices fall from April to May.

“But what continues to surprise us, is the fact that there are still regions with increases in median price and that there are still regions experiencing record median prices – a far cry from some of the doom and gloom predictions that were immediately touted when Covid-19 first hit the country.”

It may be too early for the full impact of price declines to be showing through, she says.

“But the reality is that the majority of regions saw median price increases from April to May and all bar one (Gisborne) saw annual increases in price – likely a continuing effect of demand for good properties outstripping supply.”

Meanwhile, the House Price Index (HPI) , which measures the changing value of property in the market, increased 7.9% year-on-year to 2,962, but there were no record high index levels recorded in May for the first time in 88 months.

The REINZ data also shows the impact of Covid-19 on the number of days to sell figures, as well as auctions.

Nationally, the median number of days to sell a property increased by 17 days from 41 to 58 when compared to May 2019. That’s the highest days to sell figure in 111 months.

And auctions were used in 7.1% of all sales across the country in May, with 284 properties selling under the hammer – down from 10.2% at the same time last year.

ASB senior economist Mark Smith says they expect the housing market to creak back into gear in the coming months.

“Pent-up demand, lower mortgage interest rates and the feel-good factor instilled from having no active COVID-19 cases will instil more confidence from buyers.”

But despite New Zealand’s allure as a safe-haven in the Covid-19 storm, any bounce in the next few months is likely to prove short-lived, he says.

“Net immigration is highly unlikely to scale the heights it has done in the last few years, with rising unemployment and rising housing supply hanging heavy over the market.

“We continue to expect a 5-10% fall in house prices from here, although Government and Reserve Bank action will limit the downside to some extent.”
 

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