How will COVID19 affect the NZ property market in 2020?

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As the dust clears, Kiwis are starting to ask what’s next for the New Zealand property market after COVID19. 

Will property values and sales numbers plummet? Will rents go up? And are the opportunities to be had if you know where to look?

How did COVID19 affect NZ’s property market?

COVID19 affected the New Zealand property market in a few key ways according to data from the Real Estate Institute of New Zealand.

Decreased property sales volume

The number of properties sold nationally in April during the lockdown was 78.5% less than during the same month last year (1,305 down from 6,082). NZ’s biggest regions saw similar drops in sales as well:

Auckland sales volume year-on-year -74.4%
Wellington sales volume year-on-year -85.1%
Canterbury sales volume year-on-year -79.9%
Otago sales volume year-on-year -86.5%

Interestingly, Auckland was the least affected region in the country in terms of sales volumes while Otago, Wellington, Nelson and Southland saw the sharpest decreases. 

Median price decreases

Median prices decreased in several regions during the lockdown, but the drop may not have been as steep as some expected. In fact, the national median price in April was actually 1.5% higher than it was in March:

Auckland median price April (compared to March) 2.1% decrease
Wellington median price April (compared to March) 3.1% increase
Canterbury median price April (compared to March) 4.9% decrease
Otago median price April (compared to March) 25.2% decrease

Auckland and Canterbury experienced small decreases, whereas Wellington actually saw a median price increase. Otago, on the other hand, saw a huge price drop, led by the hard hit Queenstown market. 

What’s next for the New Zealand property market?

During the lockdown, median prices in most centres only saw small decreases and the national median price actually increased. The big question is, what’s going to happen in the next 6-12 months? 

Here’s what the experts think:

  • Westpac’s economists predicted a 7% fall in national prices over the second half of 2020 back in March. 
  • ANZ has forecasted national price decreases of 10-15%.
  • ASB has forecasted a national price decrease of 6% in 2020 with a rapid recovery coming in 2021.
  • CoreLogic’s Senior property economist, Kelvin Davidson, told RNZ he expected a national price decrease of 7-10%.

A common thread in all of the predictions is that the downturn would be short lived and in 2021, house prices will rebound thanks to easy availability of credit, loosening of LVR rules, low interest rates and continuing property supply shortages. 

Another common comment was that premium properties in leafy, central suburbs may be less affected than others, while properties in areas reliant on tourism will be most affected. 

When will New Zealand’s property sales volumes pick up?

Sales volumes in New Zealand are very low as restrictions are still easing and there’s uncertainty around what’s next for the country. Barfoot & Thompson’s managing director Peter Thompson says that this isn’t necessarily a bad thing:

“The low number is also a positive sign for market stability as it does not suggest there is a large number of people who are looking to exit the housing market quickly … Vendors appear to be taking a cautious wait-and-see approach, which is the same trend that occurred in past economic downturns.”

Once normal life resumes and we see more certainty around NZ’s economic recovery, sales should increase to near normal levels and prices could recover. 

What’s more, TradeMe Property’s data tells us that demand is still there. In fact, they actually saw a 10% increase in listing views during the first week of level three (compared to the same week the year before). They also saw a huge surge in listing views by people aged 18-29 after the Reserve Bank’s announcement that they were scrapping loan to value ratios, which tells us first home buyers are eyeing this as an opportunity to get on the ladder

How will New Zealand’s residential rental market be affected?

Rent prices and tenant demand are expected to decrease in smaller centres that are reliant on tourism and hospitality – like Queenstown, which has already seen a sharp increase in rent defaults. That’s because those most affected by income decreases and redundancies are likely to be lower income earners who can’t afford to purchase a home. 

Cities with more diverse economies like Auckland, Wellington and Dunedin are less likely to see decreases as a smaller proportion of renters in these areas will be affected by COVID19 forced redundancies. 

Making decisions around property can be incredibly difficult. If you need more advice to help you take your next step – whether you’re investing, or buying/selling your home – get in touch with the team here at Money Empire. We’re experts in all things mortgages, insurance, property and wealth and our services are completely free. 

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