It’s been one crazy year in real estate. From the rumblings of a strange virus causing havoc in Wuhan, China, in January to New Zealand’s first confirmed case in late February, followed by the country going hard and early into a full lockdown at the end of March, no one knew what had hit them. Early expectations were that the residential market, and the economy, could tank, but instead house prices surged. OneRoof spoke to leading voices in the housing market to see how they got through one of the most tumultuous years in real estate.
The start of 2020: All is (relatively) calm
STEVE KOERBER, agent with Ray White Remuera, in Auckland: The market was clearly showing green shoots and I predicted at the time that prices would likely rise over the course of the year. Remuera's median price had drifted sideways for the preceding four years and with interest rates dropping further, there was only one way prices were likely to go - up.
TONY ALEXANDER, independent economist: I remember my expectation was house prices would rise about 5 to 10 per cent. I didn’t expect interest rate would fall any further and [when I talked to clients] the focus was on business strategic plans. I talked a lot about climate change because whether you believed in it or not, you needed to adapt your business to it.
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DAVID DING, agent with Harcourts Cooper & Co, on Auckland’s North Shore: I heard a lot about Covid in China at the end of January. Some of my friends over there were in lockdown. [I was thinking] it won’t come here; New Zealand is far away from China and we are so lucky. The market was starting to pick up in February and by the end of the month it was getting crazy.
REINZ chief Bindi Nowrwell: “There were a lot of expectations about doom and gloom.” Photo / Fiona Goodall
TOM RAWSON, director of Ray White Manukau, in South Auckland: In the first two months of the year I had booked a couple of overseas trips both for work and for family vacations, with an extra trip for a wedding. Work had kicked off well with some exciting agents joining our team, and my partner and I had gotten finance approval to buy an investment property.
BINDI NORWELL, chief executive of the Real Estate Institute of New Zealand: Life was normal and there was price growth in Auckland after three years of flatness in the market.
March 1 to March 25: Covid arrives and New Zealand’s borders are closed
TOM RAWSON: I could sense impending doom. My finance application for an investment property came under renewed scrutiny and I had to jump through hoops to continue the process. I share a building with a bank and the elevator rides and car park chat was daunting. I started preparations early. I had two gym memberships at the time - one on hold whilst I tried a new gym - and I cancelled both. I sold my car and bought something cheaper. I had a half share in a boat - I off-loaded that, too. I told the lawn mower man not to bother coming back and I started to gather a war chest and cut spending. At work, we tried to prepare as best we could. The situation was heading into the unknown. We had people in conditional deals that were finding any reason to exit them or rushing to get them through before “doomsday”.
Prime Minister Jacinda Ardern announces the nationwide lockdown in March. Photo / Getty Images
STEVE KOERBER: We were being careful with hygiene and social distancing. I prepared for the worst and moved my office home.
BINDI NORWELL: It was building into a crisis and we were all-hands-on-deck making sure we were ready. We wrote to a lot of ministers to say, “This is what we think could happen, this is how we can deal with it, this is how we can help.”
DAVID DING: I had six appraisal appointments postponed in a week, but I wasn’t that worried, though. I was trying to ignore [Covid], and enjoy life.
March 26 to May 12: New Zealand is in lockdown and the housing market is on hold
TONY ALEXANDER: I expected house prices would fall five to 10 percent and that house sales would be down 40 percent on the year before. I figured the unemployment rate would go 7 to 8 per cent but I never bought into these 20 per cent scenarios and I figured the economy was going to be weak for most of the year, but that the worst of the shrinkage would be over relatively quickly. I started up my surveys. When the lockdown started I had just over 2000 people signed up to receive my weekly Tony’s View and when I spat out the other end there were 10,000 people signed up. I started surveying people on what they were seeing out there. My brain couldn’t stop. I’d wake up at 3.30 in the morning. Everything was so active and I remember thinking to myself, “This is the most exciting time I’ve ever had as an economist and it’s the most important time.” My focus was on stopping people buying into extremely extended pessimistic scenarios. I advised businesses to hold on to their staff, use the wage subsidy and mortgage deferral schemes and to talk to their banker as soon as humanly possible. I was one of the first in the ones in the country talking about this $10 billion we Kiwis spend overseas now available to spend domestically.
Economist Tony Alexander on lockdown: “My brain couldn’t stop. I’d wake up at 3.30 in the morning. Everything was so active.” Photo / Supplied
TOM RAWSON: The month of April was like a handbrake being yanked on. We couldn't operate and effectively ceased trading. I thought, like many, that house prices would retract. My logic was you couldn't have 10-50 per cent of the value of shares being wiped off without the same happening to houses. Our team had daily meetings via Zoom, something I had never used or heard of prior to March. We tried to appraise the values of the 1200-odd properties the property management team manage. My partner Anna was heavily pregnant and our two-year-old had never seen me at home so much.
DAVID DING: At first, the lockdown was my best holiday in years. I never had that kind of guilt-free break as adult. The day before lockdown I bought lots of chips and lots of popcorn and I subscribed to Netflix. I thought, “I’m going to enjoy this”. But after the first week, I started getting bored and then I realised just how serious it was. No one called me about selling, about buying, about anything. It was just dead.
Ray White agent Tom Rawson: “By June it became clear prices weren't going to fall through the floor.” Photo / Supplied
BINDI NORWELL: I was on the phone constantly - all hours of the day and night - not only trying to manage REINZ but also help the industry with what they could and couldn’t do. Level 4 was pretty straight forward - you couldn’t do much - but we needed that clarity from Government. There were a lot of discussions with Worksafe and we had to go through a lot of sign- offs with the National Crisis Centre. It was the most intense period I think I’ve been through in my working career.
There were a lot of expectations about doom and gloom. There were a lot of economists coming out and saying the housing market was going to be significantly impacted through Covid, we’ll probably expect to see price declines of up to 15 percent year on year, this is a pandemic. Everyone was comparing it to the Global Financial Crisis because that’s the only kind of similar global issue we’d had. Some people thought they’re going to hold off their decision on the housing market because they thought the price was going to go down.
May 13 to July 31: The market makes a comeback
TONY ALEXANDER: My first real estate survey was in May. There were a whole lot of questions I asked agents, including, “Do you think prices are going down or up?” In May a net 17 percent thought they were going down, but four weeks later a net 18 percent said they were going up. I also asked if they were more first home buyers in the market. In May a net 4 percent said yes. By June that changed to a net 55 percent. The market was doing completely the opposite of what we were expecting.
STEVE KOERBER: Homes that had been difficult to sell since March all of a sudden sold and that was a sign of things to come.
A packed auction room at Ray White Royal Oak in July. Photo / Supplied
DAVID DING: My phone started ringing again. I launched a campaign for a vendor who said to me, “I’m out of here, I’m out of Auckland, just get it sold.” We had long queues at the open homes.
TOM RAWSON: Because the housing market had been on hold during lockdown, prices hadn't gone up or gone down. We had a black hole in terms of sales evidence. We had pre-Covid and now. Through June it became clear prices weren't going to fall through the floor and people started to transact again, and with vigour.
August 1 to December 1: Prices surge and the market gets super hot super fast
TOM RAWSON: Pre-Covid, auctions weren’t the dominant sales method in our market but post-Covid they became the only way to sell a property. We had 20 bidders turn up to fight for one average-looking home we brought to market and we had multiple offers on anything that wasn't sold by auction. Those who sat on their hands waiting for house prices to drop got left behind. Low interest rates and LVR changes made property investment favourable. This month we had more than 40 auctions booked across three nights. We wouldn't have had 10 booked last December.
STEVE KOERBER: Days on market plummeted and some homes probably sold too quickly. Average days on market for the properties I’ve sold since September has been 21 and I’ve sold double the number of homes in the second half of 2020 compared with the first half. Buyers who hesitated have found themselves paying hundreds of thousands more to get their foot on the ladder. I recently sold a Remuera house for at least $800,000 more than I could have achieved last year.
Harcourts agent David Ding: “At first, the lockdown was my best holiday in years.” Photo / Fiona Goodall
TONY ALEXANDER: From my surveys in August, a net 50 percent of agents said they were seeing FOMO (fear of missing out) in the market. A month later, the number rose to a net 77 percent and by October it was net 81 percent. By then it was clear to everyone what was happening in the market. I’m pretty proud of the surveys I got up and running.
DAVID DING: I feel pretty positive for next year. It won’t be as crazy as this year. When two-bedroom units in Bayview sold for $500,000 I was surprised. When prices rose to $600,000 I was like, “oh my God, how did that happen?”. Now, prices are $800,000 so we just never know.
BINDI NORWELL: We want a long-term stable market. It sounds really boring but that’s kind of what we want and we think that’s a good balance of buyers and sellers where there’s not too much competitive pressure. We need more supply, we need more properties. It’s great to see consents are up and there’s more building activity going on but it’s still not enough. Over the next few months I expect the activity to continue - I can’t see it changing but then you think it can’t keep going like this.
