Winter is officially behind us, and it’s been a surprising one for the housing market. Once again, the latest property data paints a picture of remarkable strength, with record median prices for half of New Zealand in August. And some economists are starting to think that a house price fall may no longer be on the cards.
Read on for our latest property market update.
House prices continue to rise
According to the Real Estate Institute of New Zealand (REINZ), it was a busy August for real estate agents in most regions. The national median house price increased by 16.4 per cent year-on-year (14.2 per cent excluding Auckland), and eight regions saw record median prices:
- Auckland (+16 per cent YOY to $950,000)
- Northland (+16.6 per cent YOY to $590,000)
- Waikato (+16.7 per cent YOY to $628,000)
- Manawatu/Wanganui (+15.1 per cent YOY to $450,000)
- Taranaki (+15.3 per cent YOY to $451,000)
- Canterbury (+13 per cent YOY to $497,000)
- Otago (+17.2 per cent YOY to $580,000)
- Southland (+20.4 per cent YOY to $373,000).
Among the underlying factors, REINZ Ceo Bindi Norwell mentioned a combination of low interest rates, the removal of Reserve Bank-enforced LVRs, low supply, people’s aspiration to have more space, the post-lockdown catch-up, and first-home buyers’ desire to get onto the property ladder.
“Unless we see more listings come to the market before Christmas, we may start to see additional pressure on house prices and affordability,” Norwell explained.
Higher alert levels had little impact on sales volumes
Another interesting thing to note is that, despite higher alert levels across the country (and in Auckland in particular), sales volumes have been the strongest for the month of August in five years.
In Auckland, the number of properties sold increased by 44.2 per cent YOY, and other regions saw large increases as well, including Nelson, Southland, Hawke’s Bay and Wellington to name a few.
According to Norwell, the adoption of digital tools has played a key role in keeping the market buoyant. But of course, the storm hasn’t passed yet.
“As we’ve already seen, 2020 seems to be defying all predictions and going against all norms at this point in time. However, the full impact of Covid-19 may not have been realised yet, particularly in relation to unemployment and the economy.”
Economists reversing their predictions
Just a few months ago, the idea that house prices would continue to increase seemed far-fetched. But the property market has so far showed an uncanny resilience, and some economists are now starting to reverse their predictions.
Westpac analysts were the first to signal a change of sentiment, earlier this month. According to their recent Home Truths report, they’re now expecting house prices to increase by 3.5 per cent between March and December 2020 (as opposed to fall by 2.5 per cent as previously expected), with an annual increase of 8 per cent in 2021.
“The collective predictions of house price decline have been proven wrong,” said Westpac’s chief economist, Dominick Stephens, adding that forecasts were modelled on past economic crises (early 1990s, 1998 and 2009).
“But all those recessions were preceded by a rapid increase in interest rates, whereas the current recession was not. This unusual feature of the current recession may be teaching us that interest rates play an even more powerful role in determining house prices than previously appreciated.”
And talking about mortgage rates…
If your mortgage rate is due to expire soon, or you’re looking to make a property move, please don’t hesitate to contact us. Mortgage rates look set to fall further in the coming months, and we can help you understand how to make the most of the current lending environment.
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