Over the last month and a half, New Zealand's housing market has seen significant changes, the full impact of which may not be clear for some time. The results of OneRoof's Mood of the Market survey this week shows buyers and sellers are worried about the economy and house prices but, for now, their property plans remain unaffected.
This suggests that severe price drops of 20 percent or more are off the cards.
While some housing markets, such as the tourism-dependant Wanaka and Queenstown, are more at risk, others may be strangely suited to weather the Covid-19 crisis.
Economist Ed McKnight believes that of all the major metros, Christchurch will be the least prone to extreme fluctuations in the months ahead. “How can house prices decrease even further than what they are now? The prices there are already so low compared to the rest of the country and Christchurch is at the bottom of its property cycle.”
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Before the lockdown, house price growth in Christchurch was negligible, with the city's median value rising just 9.5 percent to $460,000 in the last five years (Auckland's median value by comparison grew 32.9 percent over the same period).
READ MORE: Lessons from hell: What Christchurch can teach the rest of NZ
The city's stock of relatively cheap new-builds has made it popular with investors and first home buyers and, certainly for the top end of town, there is no shortage of luxury homes with ocean views, but the market, severely disrupted by the earthquake in 2011, has stayed stubbornly flat.
McKnight says Canterbury is sitting 15.25 percent below the national long-term average, which means it may not see much of a price drop. In Rolleston, he says, buyers can pick up a four-bedroom house for about $500,000. "You can’t build something for cheaper than that."
McKnight believes the job losses in Queenstown and other South Island tourism towns will lead to increased migration to cities with more employment opportunities.
“Queenstown will be shaken because the tourism won’t be there, and the workers are going to move to places such as Christchurch where there’s more employment and a more diversified economy,” he says.
Bayleys agent Adam Heazlewood agrees that Canterbury is unlikely to see big price drops. “Wider Canterbury is heavily backed by the rural sector, which is going to have a really good time in the next two years I think,” he says.
Ray White agent Wendy Coster says there are many infrastructure projects on the cards for Christchurch, making it attractive location for out-of-work Kiwis. Based on the levels of buyer enquiry and settlements she's seen, she thinks prices will go up, not down.
Christchurch is used to “rolling with the punches”, she says. “We’ve had earthquakes, we had shootings, we’ve had so much going on and we are the most resilient city in New Zealand and are likely to stay the same.”
Ray White business owner Vanessa Golightly says Canterbury's strength is that it's “reasonably affordable” compared to other regions in New Zealand. "We don’t have many people with $1m mortgage in Canterbury,” she says.
“And unlike Queenstown, Canterbury doesn’t have the same reliance on tourism."
Bayleys agent and investment specialist Angela Webb says first home buyers and investors are still active in the market. “We already have first home buyers buying three-bedroom homes on big pieces of land in reasonable suburbs. We don’t have shortage of properties here," she says.
Webb says out-of-town investors have already been making enquiries. “There are in unfortunate situations and have the pressure to sell and investors do go around looking for those situations, sniffing out bargains.
“We also have investors from Christchurch who’ve been quiet for a while and now they see the opportunity to buy."
