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The property market established a breakneck pace in the first three months of the year, but blocking the coronavirus may have accelerated the brakes, new data shows.
The QV House Price Index for April shows that the market momentum continues until the start of the clock decline in late March.
The average value of properties in New Zealand increased 7.1 percent in the year to the end of April.
Auckland’s average value increased 2.9 percent for the quarter and 4.5 percent for the year to $ 1.08 million.
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In the Wellington region, values increased 11.2 percent in the year through April, now averaging $ 785,445. Christchurch prices rose 3.7 percent to $ 516,677.
But with sales stagnant last month, house prices will be difficult to measure until activity picks up under more market-friendly Level 3 alert restrictions.
Nick Goodall, head of research at CoreLogic, which works closely with QV, said the first signs of pre-enrollment activity were encouraging, with agent-generated reviews doubling in the past week, albeit from a low base.
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Property listings are likely to be scarce after the lockout.
While the listings are likely to be sparse, demand for property would also shrink due to a hangover from higher unemployment, lower family income, a continued conservative banking policy and a significant dent in confidence, Goodall said.
Lack of buyers and sellers could lead to price stagnation as potential buyers see a shift in power in their favor, and suppliers weigh options to lower prices or hope things will improve.
“The turning point for sellers selling at a reduced price will be accelerated by the uncertainty surrounding the market, their own financial situation and, of course, the lack of buyers,” he said.
Demand for properties will vary across the country, and areas that had strong growth leading to the Covid-19 pandemic may have some pent-up demand from foreclosed buyers from the market.
Those regions included Dunedin, with average annual growth of 20.7 percent, Whanganui (32.8 percent), Gisborne (23.6 percent), and Invercargill (20.6 percent).
However, how local economies would fare in the long term would have an impact.
From that perspective, Queenstown was more vulnerable, given its dependence on tourism, Goodall said.
According to Infometrics, more than 17 percent of Queenstown’s gross domestic product was supported by the food and lodging industry, with an additional 5.9 percent from arts and recreation.
Both sectors are likely to experience lasting effects from the Covid-19 crisis which, together with an already weakened property market (1.9 percent annual growth) and an average property price of more than $ 1.2 million, caused the Queenstown is particularly vulnerable.
Things
Nick Goodall, head of research at CoreLogic, says the first signs of pre-inclusion activity are encouraging.
“The likes of Napier / Hastings and Invercargill, with a broader base of economic activity, as well as reduced exposure to the sectors most affected by the economic shock, may mean the property market is holding up better,” Goodall said.
While the government, the Reserve Bank and the banks themselves had already provided some form of support, most were temporary and there would be another fork in the road in about five months, Goodall said.
“In the first four weeks of closing, ANZ had already transitioned 7% of its clients to more favorable mortgage terms.
“When these terms need to be reviewed, many people may have to reevaluate their financial situation and that could mean the need to sell property,” he said.
“However, stressed sales are not really good for anyone, so the hope will continue to be that our economy is returning to normal by then and that certainty and confidence have increased.”
However, government stimulus policies were evolving and recent announcements had included confirmation of the temporary removal of loan / value ratio restrictions, small business interest-free loans and an extension of the Commercial Financing Guarantee scheme.
“In addition to the uncertainty for those who are not personally affected, they will need a place to invest their money and will eventually think about a future retirement again,” Goodall said.
“From that perspective, the physical nature of the property will remain attractive, especially compared to other investment options that could possibly have more uncertainty around it or offer very low returns.”
