Is this the start of a new house price boom? What the real estate chiefs think

OneRoof polled Auckland’s real estate leaders on the housing market’s surprisingly strong run since the end of the first national lockdown and asked them where they think house values and prices are heading as summer buying season approaches. Their answers shed light on a rapidly changing market that no one could have predicted at the start of the year.

Has the level of housing market activity since the end of the first lockdown in May surprised you?

Mike Bayley, managing director of Bayleys: "The strength of house prices and the level of market activity post-lockdown challenged many of the initial doom and gloom predictions and this is ultimately because historically-low interest rates — and the RBNZ’s intention to keep interest rates low — is keeping buyers strongly engaged despite the weakened economy."

Peter Thompson, managing director of Barfoot and Thompson: "I spent a lot of time talking to our sales people during the lockdowns and they always maintained a quiet sense of confidence, particularly around buyer inquiries. Many of the people who had sold just prior to the first lockdown still needed to buy and as we moved through the levels there were lots of settlements and some quick purchases."

Daniel Coulson, chief operating officer of Ray White NZ: "The pace and level of resurgence has surprised many. What many have known for a long time, though, is that New Zealand has had a long affinity with residential real estate as a safe long-term investment and the results that are being achieved now are representative of that."

Sold signs are fast becoming a permanent fixture in Kiwi streets as buyer demand outstrips supply. Photo / Fiona Goodall

Barry Thom and Grant Lynch, directors of UP Real Estate: "Back during the alert level 4 lockdown, we wrote that we had observed several meltdowns: the 1987 sharemarket crash, the GFC in 2008, bird flu, swine flu etc, etc. Each time there were real issues and, yes, things changed for a period. In reality, though, things never panned out as badly as the experts predicted. And so it has proven once again."

Bryan Thomson, managing director of Harcourts NZ: "As always, hindsight is 20/20 and looking back we would all admit that perhaps the magnitude of the challenge we perceived we were facing made us forget the basis that drives our market."

Mike Pero, founder of Mike Pero Real Estate: "Yes. It never ceases to amaze me how the New Zealand property market continues to defy the economists. I recall so many economists suggesting that the New Zealand and Aussie property markets were now in for a big adjustment — 15 to 20 per cent down. I questioned that. Kiwis are addicted to home ownership."

Barry Grieve, national manager of LJ Hooker and Harveys NZ: "The prediction was that the property market would fall apart buyer inquiry has risen, as have sale numbers and prices. I’m sure we will see more adjustments to our market in the future but with such low interest rates I think we can be quite confident that we will continue on a solid path."

Is the property market heading back into boom territory?

Bryan Thomson: "Boom is an emotive term and is not one we support. The reality is that our real estate market is being driven by strong fundamentals and, while these fundamentals remain in place, we see no reason for change."

Daniel Coulson: "Looking at previous cycles does little to provide clarity on where the market may be heading but conditions are very favourable for those considering selling. Lending is available at very favourable rates, banks are generally supportive of property purchases, rental yields are strong in many cases and first home buyers are very active."

Peter Thompson: "There is confidence in the housing market at today’s prices. Generally, confidence is influenced by four key factors: the Reserve Bank’s policy around trading bank lending, demand, employment prospects and mortgage rates. It’s worth checking in on these to get a feel for where the market is heading. From a lending perspective, there has been no indication from the Reserve that loan-to-value ratios will be made tougher, and the latest commentary around interest rates suggests that any movement on these will be downwards. With Treasury forecasting a relatively swift correction to post-Covid trends in rising unemployment and falling net migration, its position is that any decline in price is expected to be minor and that prices will continue to rise out to 2024."

Auckland's real estate market has managed to shrug off the effects of two lockdowns. Photo / Getty Images

Mike Pero: "It would appear so and, with interest rates so low, prices and volumes continue to rise."

Mike Bayley: "There’s a range of factors putting upward pressure on house prices. Low interest rates, low term deposit rates and greater access to lending are fuelling buyer activity and creating competition, while reduced construction activity forecasts and limited listings further add to the equation. Expats are active in the market and once our borders reopen there’s a general belief that more people will be looking to move to New Zealand."

Barry Thom and Grant Lynch: "September was our best month in 26 years of business. The facts now speak for themselves — the residential market in Auckland is rapidly accelerating to the point where the fear of missing out is in many cases the clear driver. Given the rapidly decreasing return on invested money, property is coming into focus and in particular the residential market. Currently we are fielding many multiple offers, many people have brought forward auctions and are achieving record sale prices. This has all added up to our average selling price being up 25 per cent over recent months."

What gives you cause for concern right now?

Peter Thompson: "I’d be cautious post-election if decision-makers try to manipulate the market to dampen price increases. Past experience shows that such interference can have negative consequences for specific groups, such as first-home buyers."

Mike Bayley: "There’s still a long way to go in dealing with the Covid crisis — the unpredictability of the virus and the potential for more lockdowns are a concern as New Zealanders risk losing their jobs and businesses."

Barry Grieve: "I think we were all worried about a larger correction in our market. We have seen unemployment rates rise upwards of 10 per cent with predictions they could quickly get closer to 20-25 per cent. This would have a real downward effect on the marketplace with many people needing to sell and it then becoming a buyers’ market. The key from here on is securing the listings as they are becoming harder to find."

Bryan Thomson: "The unknown is always the concern in both business and our personal lives. Our focus is on remaining positive, controlling what we can control and making sure our clients are able to make the best decisions possible with what we know."

Complete the following: If I were a buyer right now ...

Barry Thom and Grant Lynch: "I wouldn’t wait."

Daniel Coulson: "I wouldn’t be using price as the only indication of affordability. Yes, prices in general are higher than this time last year but borrowing money is also significantly cheaper. There are a few factors that can impact the affordability of property, not just an asking price."

Mike Bayley: "I’d be focused on action. That means doing your research and talking to lenders to fully understand your financial position and being ready to act fast when opportunities present themselves. It’s a competitive market, so developing a clear strategy and putting your best foot forward when making an offer is vital."

Bryan Thomson: "I’d be making sure I was fully prepared to act quickly when a suitable property hits the market. Preparation should include research on the type/style of property you wish to purchase, especially focusing on what are the non-negotiables, pre-arranged finance and have a broker fully briefed to assist."

Peter Thompson: "I’d be prepared to act decisively in a competitive marketplace, confident in the prevailing strength of the market over a three-to-four-year time horizon, and delighted that I call New Zealand home."

Mike Pero: "I’d be thinking there’s no certainty and no crystal balls. Economists don’t know what the future holds — most have been proven to be as accurate as horoscopes. Go with your gut feeling."

- Interviews by Catherine Masters