Market holds firm in Covid-19 storm

Tuesday 1 September 2020

Covid-19 has not led to the bottom dropping out of the housing market, as some predicted. Rather housing values have held pretty firmly, particularly in provincial and rural areas.

By Miriam Bell

The CoreLogic House Price Index* has values nationwide fluctuating slightly in recent months, but down by just 0.2% in the three months to August.

This has left the average national value at $737,854 in August.

In Auckland, a downward trend was more noticeable, with values dropping by 1.2% over the same three-month period to leave the region’s average value at $1,073,047.

Dunedin was the other main centre to experience a noticeable drop in values. It was down by 1.3% over the last three months to $545,474.

Values in the other four main centres (Hamilton, Tauranga, Wellington, Christchurch) have flattened out or slightly increased.

At the other end of the value growth spectrum sits Queenstown, where property values have fallen by 7.4% down over the last three months.

Despite this, the region’s average value remains the highest in the country at $1,128,265.

Overall, values in the main centres were down by 0.7% over the three-month period, while values in the smaller provincial cities remained flat on 0.0% and the rural centres saw value growth of 1.3%.

Invercargill and Rotorua turned in the strongest results over the last three months, with value growth of 3.7% and 3.8% respectively. This left Invercargill’s average value at $362,861 and Rotorua’s at $537,513.

CoreLogic head of research Nick Goodall says the housing market is defying predictions for greater weakness as limited supply, alongside firm demand, is seeing values hold.

“There are many factors and influences at play, and the latest round of social restrictions will have an impact on the economy and subsequently on the market.”

However, there’s currently a wide range of economic and financial support in place, including the wage subsidies, mortgage deferrals and government relief measures.

These factors, along with low interest rates and the temporary removal of the LVRs, are all helping to support the market by guarding against forced sales and assisting demand at the same time.

Goodall says as long as significant support remains, the chances of a significant correction in values are greatly reduced.

The key is understanding local differences, with international tourism hot spots such as Queenstown remaining particularly vulnerable, he says.

“Broader based economies in some of the smaller centres, especially those with a greater reliance on industries less affected by the immediate local impacts of Covid-19 such as agriculture, have translated to more resilient property markets through this volatile time.

“More favourable housing affordability, due to lower value property as well as a lower reliance on the international tourism dollar are also key factors.”

In the shorter term, various CoreLogic measurements show that real estate agent activity since 12 August has fallen away significantly, while mortgage activity barely skipped a beat in August.

Goodall says the decline in real estate activity will translate to further constraint in new listings to market and, therefore, a reduction in advertised supply from already low levels.

But, at the same time, the ongoing strong mortgage activity shows that property demand remains strong. “This further entrenches our view that widespread value drops are unlikely to occur as we move into the typically buoyant spring season.”

*CoreLogic’s data powered the QV House Price Index for the last 10 years, but this arrangement came to an end recently. Going forward, it will be the CoreLogic House Price Index (produced using the same methodology as the QV House Price Index) instead.

Comments from our readers

On 2 September 2020 at 11:05 am Winka said:
It is about Supply & Demand......it is not a new catch-phrase The predictions made for a "value-drop" in house sales values made prior to C19 have been pushed out a wee bit The current 'demand' is now created by ex-pat Kiwis returning home to good old NZ with their overseas funds reaping them a favourable exchange rate. The numbers of those returning Kiwis will likely dry up....lowering the 'demand' side of the equation. Another BIG factor is centred on the government printing presses.....in billions with a 'b'. The availability of huge amounts of funds, alongside the 'temporary' extras such as;wage subsidies, mortgage deferals, and other government relief will run out one day soon. Also, the publicised sales figures suggesting that people across the board are buying hotter than ever, is in fact the few (with extra disctetionary funds) who have been drawn into the buying frenzy, therefore placing a perception that buying a house is an undeniable good investment? To summarise the above, I am one who believes that it is only a matter of time (months or maybe a year or two) before the crunch in prices hits, most likely in parallel with the slow-down in ex-pats returning with surplus funds? Like an economist, I have two hands On one hand, that may happen....however, on the other hand 'this' may happen?? C19 has added an important set of events into our daily lives....."UNKNOWN" Time will tell

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