With the welcome transition into Alert Level 1, New Zealand is now in the enviable global position of being able to begin rebuilding its economy in post-Covid environment. That being said, the future of many sectors and industries are still up in the air – and a hot topic on everyone’s lips is the future of the property market. Will house prices go up or down? Will supply continue to meet demand?
The latest data from REINZ shows the number of properties sold in May across NZ decreased by 46.6% from the same time last year which isn’t to be unexpected due to restriction of Real Estate activities placed on the industry by the Government during level 3.
While the full impact of Covid-19 on many industries may not be realised until the end of government support packages later this year, one thing that can be said is that right now the property market is heavily weighted towards sellers.
From Alert Level 3 onwards, Professionals teams have been able to engage more actively in property viewings and sales, and since dropping Alert Levels have an influx of demand from buyers that we’re unable to satisfy due to lack of listings on the market. The total number of properties available for sale nationally decreased by -19.1% in May to 20,940, which is the lowest level of inventory for the month of May since records began.
Median house prices across New Zealand increased by 6.9% in May to $620,000, up from $580,000 in May 2019. As Shaun Taylor, CEO of Professionals explains “May's numbers are good for sellers, our members have large numbers of buyers contacting them and open homes are very busy, this is backed by the numbers so if you’re thinking of selling, there may be little benefit to holding out, acting now could ensure you sell on the right side of the market.”
A large number of buyers on our books are first home buyers or investors looking for an opportunity to take advantage of record-low interest rates and lowered LVR restrictions, which are predicted to remain in place for the foreseeable future. The Government and retail banks have taken massive steps to stimulate demand for property in a post-Covid environment, and while there are more first home buyers and investors than ever before, there just aren’t enough homes on the market to meet these demands. A generous quantitative easing programme is influencing people to invest more in assets, particularly property.
We have already experienced a surge in Kiwis returning during the early stages of Covid-19 to ride out the pandemic in their home country, and with around 1 million New Zealand residents currently living overseas, experts predict this will only increase as the year goes on. We’re now considered a safe haven and the demand for property is only set to increase as the net inflow of Kiwis also increases. This is likely to be initially for rentals as peoples move back, and then as the returning kiwis settle in, residential sales adding to demand and stable house prices.
But what about jobs?
The true impact of Covid-19 on unemployment may not be felt until later in the year when government support packages expire and the end of what could be known as the ‘artificial economy’ arrives. Banks have eased lending criteria; however, serviceability and income/expense validation are where people are meeting greater hurdles. In saying this, although it is undoubtedly uncertain times for many, a number of people are in the fortunate position of having job security and life ticks along as normal (or as close to normal as possible) for these people, with the usual things such as buying and selling property will remain a priority if it was prior to Covid-19.
All things considered, while there is no crystal ball for the property market, it certainly appears to be one in favour of sellers, with no slowdown of demand in sight in the near future. And as Shaun points out “Our Real Estate agents know what is selling and who is looking to buy, so they are the best people to inform you about the only market that really matters, your local one. If you’re thinking of selling give them a call or drop by an open home on the weekend.”