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Property Market Heads Into the Unknown

06 May 2020

The latest QV House Price Index data for April provides us with the rolling three month average strength of the residential property market.  But what it doesn’t show us is the dramatic impact COVID-19 had had in the real estate industry since the country went into Level 4 Lockdown on 25th March. While Level 3 Lockdown has provided an opportunity for real estate agents, vendors and purchasers to resurrect at least a semblance of a property market, sales volumes are significantly impacted and this isn’t reflected in the latest QV House Price Index data series. 

QV General Manager David Nagel said “The data shows the property market was continuing to perform strongly throughout early-mid March with all 16 of the major cities we monitor once again showing positive quarterly value, indicating strength right across the country. But with sales volumes for April being down generally between 80-90% on normal April activity, the data is skewed towards the earlier stages of the three-month period where sales volumes were high”.

The average value nationally increased 7.1% year on year and the average value is currently sitting at $735,979. This represents an increase of 3.0% over the past three months, slightly up on quarterly growth last month.  The average value in the Auckland Region sits at $1,079,815, up 2.9% over the last quarter, and up 4.5% year on year.

 “For the last few weeks we’ve all been guessing what the likely impacts of COVID-19 would have on the property market.  But the truth is we’ve all been guessing as we’ve got no data to help us. This is new territory for all of us” says Mr Nagel.

“From the limited sales activity that has occurred in April most appears to involve properties listed prior to lockdown.  Many of these would have had the benefit of open homes and viewings under pre-lockdown conditions.  We’ve seen very few new listings as people take a wait-and-see approach as we try and find the new normal”, he says. 

 “What happens to house prices beyond this point will be determined by market forces and the changes in supply and demand” says Mr Nagel. 

New Zealand's response to the pandemic has so far been positive relative to international standards and this augurs well for a reduced impact on house prices. Economic strength and employment levels have strong links with the housing market so much will depend on the depth of any subsequent recession and the speed of economic recovery.

“Many of the fundamentals to the property market have changed over the past month and a half with immigration unlikely to be a future driver of housing demand, although this could be supplemented by returning expats as they seek the safety of home”, says Mr Nagel.

Financing costs remain cheap and will potentially become even cheaper with very low interests rates likely for at least the next 2-3 years.  And banks are well capitalised so are in a position to lend.  But they won’t be making rash lending decisions. With skin in the game, they will be prudent lenders so the lowering of LVR limits may have limited impact on new buyers entering the market.  

The supply of new houses for sale will likely be reduced. The pipeline for new builds has been impacted as has almost every other industry during lockdown. Most New Zealanders are looking to consolidate their position in their current home as the country works its way out of lockdown. Selling an existing property and upgrading to a different home will likely be furthest from their mind.  Although some may be forced to downsize or even relocate to a new city in order to gain employment.

“Buyers that have the means will likely dominate the market over the coming months.  But don’t expect to see any bargains in the short term.  There will be limited stock available for buyers who will probably exercise patience and this could force prices down for vendors that simply have to sell”, he says.

“Transaction volumes are likely to remain just a fraction of pre-lockdown levels. We can expect a market filled with uncertainty at least through to the end of 2020 as the economy finds its feet again”, he says.

A full breakdown of the QV House Price Index figures for April 2020 is available by clicking here

 

Auckland

The Auckland area saw values increase 4.5% year on year and 2.9% over the last quarter.  The average house is valued at $1,079,815. 

Within Auckland, houses in the Rodney area experienced 2.3% quarterly growth while North Shore values went up 4.5% Waitakere at 2.2% and Manukau at 2.5%.  Values in the Papakura area went up slightly by 1.4% over the three month period. 

Annual growth painted a different picture with Papakura leading the way at 4.2% growth, followed by Manukau at 3.9% and Waitakere at 3.6%.

Hamilton

Strong value growth was seen in Hamilton with values increasing by 7.6% over the last twelve months and 2.2% over the last quarter. The average value is now $629,869.

Tauranga

Modest value growth was seen in Tauranga with values increasing by 4.6% over the last twelve months and 0.6% over the last quarter. The average value is now $774,526.
 

Wellington

Strong value growth was seen in the Wellington area with values increasing by 11.2% over the last twelve months and 3.9% over the last quarter. The average value is now $785,445.

Value growth within Wellington region was relatively consistent with Hutt City leading the way with 17.7% annual growth and 4.9% quarterly increase to the end of April.

Nelson / Tasman

Strong value growth was seen in Nelson with values increasing by 6.1% over the last twelve months and 1.4% over the last quarter. The average value is now $659,527.

Christchurch

Modest value growth was seen in Christchurch with values increasing by 3.7% over the last twelve months and 1.2% over the last quarter. The average value is now $516,677.

Dunedin

Very strong value growth was seen in Dunedin with values increasing by 20.7% over the last twelve months and 4.8% over the last quarter. The average value is now $552,297.

Provincial centres, North Island

Otorohanga leads the North Island in quarterly growth, up 12.5%, followed by Opotiki 8.6% and South Wairarapa 8.0%. Whanganui leads the way in annual growth, up 32.8%, followed by Rangitikei 24.2% and Gisborne at 23.62%.

Provincial centres, South Island

Invercargill leads the South Island in quarterly growth, up 8.6%, followed by McKenzie District 7.9% and Gore 6.7%. Invercargill also leads the way in annual growth, up 20.6%, followed by Gore 20.3% and MacKenzie District at 18.2%.

 
Annual change in values
For all media queries, please email our National Spokesperson Kirsten Magnusson, kirsten.magnusson@qv.co.nz or call 09 361 7216.
 

NB: Our partners CoreLogic have incorporated an improvement to the methodology in November 2018, which underpins the House Price Index figures. The change only concerns aggregated indices (i.e. where an index covers multiple Territorial Authorities). This new methodology provides less volatility and a more precise measure of value changes. This change only impacts recent movements, with the historical series mostly not impacted. If you have any questions regarding the change, please get in touch with us by emailing communications@qv.co.nz 

The QV HPI uses a rolling three month collection of sales data, based on sales agreement date. This has always been the case and ensures a large sample of sales data is used to measure value change over time. This does mean the measure is less reactive to recent market movements but offers a very smooth trend over time. Also, due to having agent and non-agent sales included the index provides the most comprehensive measure of property value change over the longer term.

With the COVID-19 enforced level 4 lockdown rendering property settlements that require physical movement of people unlawful, April will have a significantly reduced number of sales which means the latest index is dominated by sales from before the lockdown.

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