Market holds firm in Covid-19 storm
Tuesday 1 September 2020
CoreLogic's Nick Goodall
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.
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