For the fourth month in a row, the New Zealand property market saw a new record median house price in December 2020 – largely due to record-low listings.
Check out our latest property market update, to kick off 2021 and stay ‘in the know’.
Lack of choice pushing prices up
According to the latest data from the Real Estate Institute of New Zealand (REINZ), in December median house prices across New Zealand increased by 19.3 per cent year-on-year, currently sitting at $749,000.
Overall, 11 regions saw record median prices in December, including:
- Gisborne (+43.9 per cent YOY to $590,000)
- West Coast (+31.9 per cent YOY to $285,000)
- Manawatu/Wanganui (+31.3 per cent YOY to $528,000)
- Hawke’s Bay (+27.3 per cent YOY to $662,000)
- Northland (+25.2 per cent YOY to $675,000)
- Taranaki (+19.6 per cent YOY to $500,000)
- Wellington (+18.6 per cent YOY to $812,251)
- Auckland (+17.8 per cent YOY to $1,040,000)
- Waikato (+17.4 per cent YOY to $675,000)
- Canterbury (+16.5 per cent YOY to $536,000)
- Nelson (+12.7 per cent YOY to $682,000).
These figures confirm the pattern that has been seen for much of 2020. According to REINZ chief executive Bindi Norwell, the combination of low inventory levels, high levels of confidence and record-low interest rates is intensifying competition among buyers, putting pressure on house prices and speeding up sales. The median number of days to sell a house is now 27 days – the quickest pace in 17 years.
Highest-ever number of properties sold in a December month
As expected, this summer is gearing up to be a busier-than-usual season for the property market.
REINZ data shows that the number of houses sold in December 2020 was up by 36.6 per cent year-on-year – the highest number of properties sold in a December month ever. Regions with the largest increase in annual sales volumes included Auckland (+66 per cent), West Coast (+55.3 per cent), Canterbury (+45.6 per cent), Waikato (+39.5 per cent), Gisborne (+31.3 per cent), and Taranaki (+29.2 per cent).
What’s next for prices?
Commenting on the data release, Norwell highlighted the pressing need to address the issue of housing affordability, adding that REINZ expects the market to remain busy in the coming months.
According to independent economist Tony Alexander, there are at least six reasons why property prices have increased so much since the national lockdown in May 2020, including:
- The momentum created by lower-than-ever interest rates since 2019
- The subsequent interest rate cut in March 2020, with the Reserve Bank setting the expectation that rates will remain low for the foreseeable future
- Lower-than-ever term deposit rates which, Alexander says, “produced a structural shift by some investors away from low-risk low-return assets to higher-risk housing”
- The (so far anecdotal) expectation that returning Kiwis and new migrants will move to New Zealand in droves once the borders reopen
- The diversion of funds from international travel into home renovations and property purchases
- A soaring Fear of Missing Out (or FOMO), “driven not just by evidence of prices soaring, but the lowest property listings on record.”
Will prices keep rising strongly in 2021? Economists at Westpac, ASB, Kiwibank and BNZ believe low interest rates and high demand will continue to have an impact, with national property prices expected to rise by as much as 13 to 16 per cent.
Quotable Value general manager, David Nagel, is more cautious. According to Nagel, the property market is in for a ‘hectic summer’, fuelled by the shortage of listings, record-low interest rates, and the upcoming reintroduction of RBNZ-enforced LVR restrictions in March 2021.
“But when LVRs do eventually kick back in, just as the weather begins to cool in March, I expect the property market will start to cool as well,” Nagel said. “I’m predicting we’ll see something more akin to 2019 levels of growth again, when prices increased by an average of 4-5 per cent nationally, as opposed to the rampant double-figure growth that we’ve witnessed during the back half of this year.”
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