'The reality is that people always need to buy and sell houses'

They say a week in politics is a long time, but in the current environment, a day is an extremely long time with announcements around COVID-19 happening all over the world at any given minute. Even from a New Zealand perspective, things are changing on a daily basis.

If we look back 12-14 months ago a number of experts were predicting a softening of the property market and flattening of house prices. The predictions were that the price rises we were experiencing couldn’t continue.

Jump forward to February this year and oh, how things have changed. Since then property prices have increased dramatically with property prices hitting record highs in many parts of the country and our February statistics showed that for two months in a row, every region in the country experienced annual price lifts.

Additionally, auctions were at their highest level in 27 months and the median number of days it took to sell a property was at its lowest in 126 months.

The (previous) record low interest rate announced in August last year, increasing consumer confidence and lack of listings had created a sense of urgency the property market hadn’t seen for a couple of years.

Ordinarily, these sorts of situations would see us make predictions that we would expect market conditions to continue unless the demand/supply model starts to be addressed.

But there are not ordinary times – we’re in a whole new world now.

A few months ago, the world had never heard of COVID-19 and never in our wildest dreams would we have thought that governments around the world would be shutting their boarders and banning public events. Even the Olympic Games is potentially under threat. Things are changing so quickly, that by the time you read this article in print, parts of it may potentially be out of date.

As I write, it’s too early to see any data showing that COVID-19 has had a significant effect on the property market, but the reality is that there are impacts right now, and there will be further impacts going forward.

In the short term, it’s more the smaller aspects that people will be noticing first. Open homes, auctions and rental property viewings will all be taking a more cautious approach such as displaying signage around COVID-19 at entrance ways or having additional sanitiser available onsite. But it also comes down to some of the more practical things such as asking people to register their contact details should someone at the open home become sick at a later date or asking people to stay away if they’re unwell to avoid infecting others. Some real estate companies are even asking people to bring their own pens to avoid cross-contamination – such simple, but effective measures in this heightened environment.

The industry is also looking to technology to provide a solution through the use of online/phone bidding at auctions or virtual reality tours for open homes and rental viewings. So there are ways of ‘keeping calm and carrying on’ despite the uncertainty around us.

But the real question is everyone wants to know the answer to is: what is the likely impact on house prices?

While it’s too early to tell, and to be honest, hindsight is the only real way we’ll be able to accurately measure the impact, what we can do is look to recent examples for guidance.

The Global Financial Crisis (GFC) was obviously global in its nature, so provides us with some reasonable comparatives. Looking at the data from that period showed us that in the first 12 months after the GFC started, median house prices across the country fell 5.9% year-on-year. Whilst the recession technically lasted till June 2009, prices began rising again after January 2009. In the year ending January 2010, median prices increased by 9.4% and were sitting $10,000 above where they were in January 2008 when prices started falling. This really highlighting how (relatively) quickly the market can recover from times of economic uncertainty.

If you need to move house at the moment, and you’re in a financial position to do so, then our advice would be to continue as you would had COVID-19 not been something that has entered the daily vernacular. Continue to visit open homes, but just be sensible from a health and safety perspective.

We don’t expect the market to come to a complete stop – the reality is that people always need to buy and sell houses. We’ll just have a "new normal" for a few months while the country moves through what will be difficult times, but the reality is, we will come through this – we just need to give time, time.

- Bindi Norwell is chief executive at the Real Estate Institute of New Zealand