Unprecedented is a word that's used so frequently lately, that perhaps it has lost its impact. However when it comes to Covid-19 and real estate it's particularly relevant. Never before, have the entire New Zealand property market and the framework that supports it been locked down.
It too early to tell how much damage the virus has done to the market but what we do know is that it’s more important than ever to focus on the collation, analysis and correct application of available data to ensure decisions are made from an informed position. Conversely, the risk of relying on misleading or incomplete data, or data that may be biased towards a particular outcome, has never been greater.
The latest Property Report figures capture property values on March 25, the day before the country went into lockdown. Most regions and territories were on a positive trajectory before the Covid-19 crisis hit, with Auckland City and Auckland’s North Shore reporting quarterly median value lifts of around 5 per cent, and the rest of Auckland out of negative territory.
Dunedin was the star performer, registering double-digit growth of 10.6 per cent, and Wellington was up 6.3 per cent, while Hamilton and Tauranga were at the lower end of the scale, turning in rises of 3.4 per cent and 2.9 per cent respectively. Of the major metros, only Queenstown and Christchurch registered the lowest quarterly growth – 1.5 per cent and 1.1 per cent respectively. (In Christchurch's case this was to be expected, as the market there has been flat for some time, but the figures for Queenstown denote Covid-19 was already having an impact.)
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In general, had the virus not turned into a global pandemic and resulted in severe restrictions, it's likely we'd be looking at significant price lifts in many locations across New Zealand and making predictions of boom times.
However, the lockdown has essentially frozen property values, with the March 25 figures our new benchmark, against which we will be comparing future market activity.
The usual benchmarks – values from three months, 12 months and 24 months ago – will have less relevance in the post-lockdown market, but we can draw conclusions from historic analysis of past events such as the GFC.
1. Market uncertainty will lead to more caution
Kiwis will be in a state of heightened fear on the back of job losses and wholesale changes to how they live their daily lives. Whilst it is difficult to predict what impact this will have on values, what we do know from analysis of past events is that fear leads to more cautious behaviour. Many market participants will opt to wait on the side lines until they can see what’s happening in the market more clearly. For Auckland, that means it's right back where it was a year and a half ago.
2. Short-term gain is no longer possible
Buyers and sellers typically avoid short-term plays during periods of uncertainty. It's unlikely there will be much appetite or scope for people to seek short-term capital growth, which in turn will remove the hype from the market. Expect buyers and sellers to take their time when making property decisions.
3. Confidence is king
During economic downturns, confidence in the housing market tends to take a hit. Confidence, though, is subjective and difficult to measure and one that’s difficult for policy-makers to turn around on the back of a single initiative. It will take a joint effort from Government, Reserve Bank and the private sector to push confidence levels back into more positive territory.
4. There is no one New Zealand property market
The housing market in New Zealand is a complex beast, comprising numerous sub markets, each with their own individual drivers. More importantly each sub market will be impacted by the current situation in very different ways. In fact, it can be highly misleading to simplify the property market into a single value.
Critical to understanding where values sit in the coming months will be micro factors such as the dominant type of housing stock in any given location; the breakdown of what has sold and what it has sold for; and who has been buying and what their current equity position is. The key message is that buyers and sellers should not make hasty decisions based on a single statistic about an area.
Moving forward, OneRoof and its data partner Valocity will be implementing a series of measures to track what has happened since lockdown. These measures will cover a range of different property market metrics – not just the median sales price of what has transacted, but breaking down analysis to understand what’s been selling, how has this changed, and what the nature of the housing stock is in the location. This will allow us to track more effectively the actual changes to individual sub markets.
- Owen Vaughan is editor of OneRoof.co.nz; James Wilson is director of valuation at OneRoof's data partner, Valocity
