House prices have continued to rise across New Zealand, with every region’s median house price seeing a year-on-year increase from July 2020. We saw two out of 16 regions reach record median prices, two with equal records, and 20 districts reach new record median highs.
The strength of the market has been reflected in the REINZ House Price Index (HPI), measuring the changing value of property in the market, which reached a new high on the index nationally. This was the highest annual percentage increase in the HPI that we’ve seen since records began and is the 14th consecutive month that we’ve seen a new high. Every region across New Zealand reached a new record level in July, which indicates the underlying value of property is holding strong and will likely do so for a few months yet.
While the last few months have shown early indications that the rate of growth is starting to ease, it is too early to say whether this is the usual easing we generally see occur in the colder months or if the Government’s intervention in the market and changes to the official cash rate (OCR) are starting to take effect.
We’ve heard from agents around the country that the numbers of attendees at auctions are sufficient and that both first-home buyers and investors are still relatively active in the market.
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Auctions remain a popular method of sale across many parts of the country as they provide a good way of finding the value of a property in a fast-paced market and provide open-market transparency for purchasers.
Compared to the same time last year, sales volumes have decreased across most of New Zealand. However, July 2020 was the first full month of real estate market activity post-lockdown and saw an unusually high level of sales. What we are seeing this year is far more aligned with the usual winter sales numbers, but in a market that has higher demand and is supply constrained. It could also relate to the return of loan-to-value ratios and talk of interest rates looking to rise - however, we will need a few more months of data before we can see the impact of these changes and whether they are a long-term trend.
The availability of properties for sale continues to constrain activity in the current market, with a record low level of inventory reported in July and strong buyer demand. At the end of July, we experienced the lowest level of inventory we have ever seen (a total of 12,684 properties).
Heading into spring, this is usually the time people prepare to sell their property. There are signs of more listing activity, including from people who will take possession of a new build, a result of the record levels of consents granted over the last year. According to Statistics New Zealand, a record 44,299 new homes were consented in the year ending June 2021. This is the fourth consecutive month of rises, which includes the growth of multi-unit homes such as townhouses, units and apartments.
REINZ CEO Jen Baird: "The availability of properties for sale continues to constrain activity in the current market." Photo / Supplied
Auckland is seeing a large proportion of these consents, with multi-unit homes accounting for 64 per cent of new homes consented in the June 2021 year, compared to 30 per cent across the rest of the country.
This hopes to alleviate people’s fear of not finding anything, which has seen many vendors reluctant to put their house on the market until they have secured a property elsewhere. This increase in consents and the resulting increase in building, along with the arrival of spring, should hopefully ease the pressure of stock and deliver more choice to the market.
Several policy and market changes are expected to affect the real estate market and our data in the coming months, particularly as the Government announcements from March 23 come into force. This includes the Housing Acceleration Fund – a $3.8 billion fund aimed at speeding up the pace and scale of home building to improve supply; increasing the income caps and house price caps from April 1 for the First Home Loan and Grant; extending the bright-line test from five years to 10, which took effect on March 27; and the changes to interest deductibility on residential property income.
Some of New Zealand’s leading banks announced recently that they have reassessed lending requirements for smaller apartments, which aims to help people get onto the property ladder. In addition, apartments can be a more affordable entry into the housing market and are becoming a popular option for buyers as populations in cities grow.
Interest movements are also on the rise, with the Reserve Bank raising the OCR for the first time in seven years and the major banks following suit with their rates.
The level 4 and level 3 lockdowns may add some interesting alterations to the market. This time we are seeing confidence remain in the market, with many people optimistic and wanting to maintain a sense of normality - it’s different to what we saw in the lockdowns of 2020.
Real estate professionals now have well-tested ways of working that have enabled them to continue working remotely and effectively. The technology we have available is making it easier to purchase homes remotely, with agents carrying the tools to assist purchasers to buy with confidence, such as 3D virtual tours, and great photography to provide buyers with sufficient viewing capability of a property.
Agents can also deliver remote appraisals (which must be followed up with physical appraisals as soon as the alert level allows), listings, electronic sales and purchase agreements, and online or phone auctions. It is important for vendors, agents, landlords and tenants to communicate about what work can be done remotely through lockdown, and for buyers to seek legal advice before entering an agreement.
It will be interesting to see the impact of the lockdown in the months ahead, and whether it will influence the usual upward listings and market activity that spring brings.
- Jen Baird is chief executive at the Real Estate Institute of New Zealand (REINZ)
