OPINION: One of my great passions is the discovery of meaningful patterns in New Zealand property data. It’s a passion borne of my view that the numbers always tell the real story and it’s a pursuit to which I’ve devoted significant time in recent years in an effort to better understand the market and why it does the things that it does.
In many cases, this research throws up results which are at odds with the prevailing narrative of the day. Examples of this would be the discovery that foreign buyers actually made very little difference to house prices prior to the introduction of the foreign buyers ban in 2018, that “ghost homes” make virtually no difference to house prices, that the Reserve Bank’s loan-to-value-ratio restrictions did not bring down house prices or stabilise the property market, that property investors do not push house prices up and that New Zealand has never led the world in home ownership – despite beliefs that held sway at one time or other but which ultimately proved to be untrue under the glare of market data.
Of course, not all views are debunked. Sometimes research actually confirms strongly held views. This is certainly the case in respect of the belief that house prices broadly double in some parts of New Zealand every ten or eleven years and have done so every decade over the past four decades. It’s also true of the belief that the New Zealand property market doesn’t crash – or, at least that it hasn’t done so in almost forty five years according to the firmly established data.
But what of the view that the property market cools in election years – particularly in the months leading up to the election? This phenomenon was certainly at play in the months leading up to the 2014 and 2017 elections according to data prepared by OneRoof data partner Valocity in 2017, which showed that between the announcement of the date of the election in March 2014 and the election in September of that year there was an average drop in sales of 23 percent per month in Auckland – followed by an immediate recovery to previous levels, post-election.
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The same trend was once again in play in the lead up to the September election in 2017. In the 12 months between July 2016 and July 2017 sales volumes across the country were down by 55.4 percent (4,229 properties) – with the majority of that drop taking place after the election date was announced in February of that year.
Precisely why property markets should flatten in the months prior to an election is a matter of some debate – but, in my view, it’s largely the result of uncertainty around the outcome of the election – particularly where a party is proposing a policy or policies which are radically at odds with the status quo. This uncertainty feeds into market confidence and causes punters to put their plans on hold until after the election.
But has this phenomenon been playing out again in the months leading up to the September election?
No – and for very good reason. Covid-19 has completely changed the ‘normal’ dynamic of the market in 2020, in two ways. Firstly, the lockdown period effectively froze the market, in time, for almost two months rendering any data which covers that period meaningless and made any comparison with previous election years pointless. Secondly, an unusual spike in house sales activity which started late last year and was still evident prior to Covid-19 has meant that demand has outstripped supply in many regions of the country. This means that low sales volumes can’t be reliably read as a reflection of market confidence when they could just as likely be due to the limited stock available for purchase.
For all of these reasons, and as with most other areas of the economy, Covid-19 has altered the ‘usual’ landscape and changed the rules which would normally apply.
What we do know is that, in 2011, 2014 and 2017, the market took off again after the elections in those years. Whether that will happen this time is far from certain.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
