New Zealand’s housing market went into a nationwide lockdown in an extremely strong position. March was the fourth month in a row where every region in the country saw an annual increase in median sale prices.
Additionally, March saw a new record median price for the country - $665,000 - and record median prices in eight regions, including Auckland, and saw 12 out of 16 regions with double-digit annual median price increases.
Without denying that there are going to be some tough times ahead, the fact that the housing market went into the pandemic in such a strong position suggests that things may not take as long to recover had the market been in an entirely different position.
Our first indicator of how the market responded to the Covid-19 crisis came from the last six days of March – our first six days in lockdown. Sales didn’t grind to a complete halt as many expected they would; with nearly 500 properties still sold during those six days. Even though most of these sales were likely already in negotiation as the country went into lockdown, they were more than anticipated. However, the stark reality is that this represented a 67 percent drop in the number of properties sold compared to what we would have expected to happen in the last week of March.
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While online methods of buying and selling did allow sales to take place during alert level 4 restrictions, expect the number for April to be low. The market will be tracking sales volumes closely in the coming months, as well as monitoring price, days to sell, the percentage of auctions taking place and even the sale price to CV ratio. All of these indicators will start to give us an idea of how quickly we can get back on track.
Already, we’re hearing stories of enthusiastic buyers who are keen to get back to viewing properties, which may be understandable given that many will have been stuck staring at the same walls for four and a half weeks.
REINZ CEO Bindi Norwell: "Of utmost importance though is the country’s ability to adhere to relevant health and safety legislation."
There are other opportunities the pandemic has presented – such as the low interest rate environment and the fact that the Reserve Bank has now removed its loan to value ratio requirements. This means that there are opportunities for first time buyers and investors to look at properties that perhaps may have been out of reach a few months earlier. But first time buyers will have to balance this up with likely falls in their KiwiSaver funds.
Another factor that will play a considerable role in the property market’s recovery is the unemployment level. Right now, there are a lot of people whose financial position is in a very difficult position due to restructures and redundancies. This is particularly true in regions that rely significantly on global tourism such as Rotorua and Queenstown.
This will make it extremely difficult for those people to be able to consider purchasing a property in the next few months, and banks are likely to be very prudent with their lending at the moment, so if unemployment figures keep rising, this will more than likely mean that the housing market recovery take longer to recover than we anticipate. The Government has helped buffer this impact with a range of subsidies and banks have been supporting people through mortgage holidays.
One other important measure will be listings. Prior to the pandemic hitting New Zealand’s shores, new listings at the end of Q1 were down around 2,000 properties than at the same time last year. When demand for a product outstrips supply, prices will rise. If we see a flood of new listings post lockdown, this could lead to prices falling, but if supply continues to remain as it was prior to Covid-19, then we may see prices rising again in the not too distant future. Another factor to consider is the likely fall in net migration as a result of New Zealand closing its borders.
Of utmost importance though is the country’s ability to adhere to relevant health and safety legislation and to ensure things such as social distancing remain part of our daily routine to ensure the country doesn’t have to go back into lockdown. This is crucial from not just a housing perspective, but a wider economic perspective.
There are many factors that will impact the housing market in the coming months. The country’s collective love of property means the market will recover, but the million-dollar question is: how long will it take?
- Bindi Norwell is the CEO of the Real Estate Institute of New Zealand
