Covid be damned – the market is booming

Those who were anticipating a Covid-prompted housing market collapse got it wrong with the latest REINZ data revealing strong growth in prices and sales.

Friday, September 11th 2020

REINZ chief executive Bindi Norwell

Not only did the national median house increase by 16.4% year-on-year, and by 2.4% on July, to $675,000 in August, but every region saw an annual increase in median prices.

Half of the regional markets saw double-digit year-on-year increases and hit record median prices. They were Northland, Waikato, Manawatu/Wanganui, Taranaki, Canterbury, Otago and Southland.

Additionally, Auckland’s median house price increased by 16.0% to a new record high of $950,000 from $819,000 at the same time last year. It was also up by 3.5% from $918,097 in July.

REINZ chief executive Bindi Norwell says they would never have guessed that eight regions, and 17 districts/cities, would see record median prices just four months after the entire country was in lockdown.

“The housing market’s recovery post-lockdown over the last few months has been astonishing and has certainly surpassed many predictions.”

She puts the uplift in prices down to a combination of low interest rates, the removal of LVRs, the lack of listings, people’s aspiration to have more space/a bigger backyard, catch up post lockdown and first time buyers’ desire to get onto the market.

“Unless we see more listings come to the market before Christmas, we may start to see additional pressure on house prices and affordability.”

It’s not just prices that are booming of late, sales volumes have skyrocketed too.

The number of properties sold nationwide in August increased by 24.8% from the same time last year (from 6,132 to 7,652). That’s the highest number of sales in an August month for five years.

In Auckland, the number of sales in August increased by a hefty 44.2% year-on-year (from 1,812 to 2,612). Again, that’s the highest number for the month of August in five years.

While it was Auckland that saw the largest annual rise in sales volumes, six other regions also saw double-digit increases. They were Nelson, Southland, Hawkes Bay, Wellington, Tasman and Northland.

However, four regions did see an annual decrease in sales. They were Gisborne, Marlborough, West Coast and Otago.

Norwell, who describes the overall volume of sales nationwide over August as “pretty incredible”, says the level three ‘lockdown’ imposed on Auckland from 12-30 August had little impact on sales volumes.

This shows how the adoption of digital tools has been a key factor in keeping the property market moving as we moved back up the alert level system, she says.

“It will be interesting to see what happens now that we’re heading into spring, as traditionally sales volumes start to lift as the weather warms up.

“As we’ve already seen, 2020 seems to be defying all predictions and going against all norms at this point in time.”

But it’s worth noting the full impact of Covid-19 may not have been realised yet, particularly in relation to unemployment and the economy, she warns.

For Kiwibank senior economist Jeremy Couchman, the REINZ data shows Auckland’s level 3 lockdown did little to disrupt the housing market in August.

He says sales held up and house price growth hit a double-digit rate in the City of Sails. “But a housing shortage, record low mortgage rates, and the absence of LVR restrictions have hardened market resistance to Covid-19 across much of New Zealand.”

The surprising strength in the housing market suggests that an expected correction in the market won’t be as severe as they had previously expected, Couchman says.

“But demand is still expected to cool heading into the end of the year. The wage subsidy is waning, and net migration is virtually non-existent while our borders are closed.”

While economists continue to warn of ongoing uncertainties and an economic downturn, of late many have revised their earlier predictions on the extent of likely house price falls.

Earlier this year, ASB was forecasting a 6% decline in house prices going forward, but it is now picking a fall of about 3%. Likewise, Westpac was expecting a 7% decline but is now forecasting a 2.5% fall.


On Friday, September 11th 2020 11:43 am PaulusDNZ said:

Such are the effects of incredibly low interest rates.

On Friday, September 11th 2020 11:52 am Winka said:

But...but....but Could it be that the only thing got wrong by all future-forecasters is the date? I learnt (& subsequently 'taught') that past performance is not necessarily automatically applied going forward. In simple terms, someone said, "a wise man knows that nothing like this goes up in perpetuity", and that date when it drops is the only thing in question. Some of the wealthiest in history buy shares when everyone else is selling....and vice versa. As in your article....there are things that favour the continued rise in house prices to date.... eg; lower interest rates, wage and business subsidies and so on However, there is now a diminishing "demand" from Chinese house buyers, and wage & business subsidies soon to stop, and.....yep, an election, coinciding this time with another big election in the USA As I've said before..."time will tell."

On Friday, September 11th 2020 4:06 pm WellyLL said:

Low deposit interest rates are to a level now it is no longer worth my time to fill out an application form. I looked at shares, but I have concerns about the P/E ratios and whether those real earnings are going to be sustainable once the covid chickens come home to roost with the government running out of funds. So that leaves property...with some risk yes...but I can borrow money so cheaply and if I'm careful with my leveraging and take a long term view I think I can weather the storm. Seems then it is a no-brainer why property is exploding.

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