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Bayleys September Market Round-Up

Tags: Residential Residential Views

A summary of some of the recent developments shaping New Zealand’s housing market over the last month.


Many of New Zealand’s banks, economists and property commentators have been scrambling to revise forecast projections this week as the latest sales data across the country illustrates a residential property market with clear momentum.

In its Monthly Property Report, Real Estate Institute of New Zealand (REINZ) data showed median house prices across the country rose 16.4% year-on-year, producing the biggest lift for an August in five years.

All of New Zealand’s regions saw a lift in the monthly median sale price with Auckland’s sale results unphased by the latest round of COVID-19 lockdown restrictions, producing a record median sale price of $950,000, up 16% year-on-year.

The sales data is extremely interesting, illustrating what salespeople have been seeing on the front-lines in recent weeks.

Returning expatriates have had an impact on the upper price bands, seeing sales over $1 million reach the highest market share since records began.

Similarly, stock levels are extremely low, with a 13.2% decrease year-on-year, bringing the total number of properties available for sale across the country to its lowest level on record.

Eloquently compiling these drivers into one succinct list independent economist Tony Alexander has revealed 25 reasons why house prices keep rising despite the current economic climate. His analysis illustrates how a variety of social, personal and financial factors have come together to see greater importance placed on home and wealth creation while government policy and stimulus provide the means for many Kiwis to keep the homeownership dream alive.

Despite positive market sentiment the latest Gross Domestic Product (GDP) data from Statistics New Zealand reveals we have just experienced the most aggressive economic regression in New Zealand’s history.

While no less alarming, the 12.2% fall in economic productivity is slightly softer than earlier predictions largely due to less time the country spent in lockdown.

Commentators have called the data “unsurprising”, echoing the government’s sentiment that the fall is no longer what matters, it’s how we recover.

In-depth reports:

Illustrating how property-related variables can impact priced-based information, the Real Estate Institute of New Zealand’s (REINZ) August Housing Price Index (HPI) shows median sales data for the Wellington region to be comparatively unremarkable in relation to better performing housing markets across the country. However, the region recorded one of the strongest performances on the HPI over the last three months. This serves as a reminder to look at the whole picture when drawing to conclusions about local market performance.

The forecast for near-term economic growth is less pessimistic than expected, Treasury’s Pre-election Economic and Fiscal Update shows. Noting the important role rising house prices play in supporting the economy, the report anticipates weaker house price growth in 2021 as border restrictions bite and the flow of fiscal support dries up. However, given the recent market resilience and the expectation that interest rates will hold at record lows for longer there may well be room for greater optimism.

In ASB Bank’s latest Housing Insights report, its economists explain the relationship between falling interest rates and rising property values. While mortgages that are due to be repriced onto lower rates will provide support for housing inflation through 2021, the report expects a correction as support measures wind down, border closures persist and unemployment rises.

Topical articles:

The latest Buyer Classification data from CoreLogic New Zealand shows the share of purchases made by mortgaged investors over the past two months has risen again, illustrating how low interest rates and the removal of loan-to-value restrictions has aided an upswing in property purchases.

Predicting that we’re at the start of a new period of a property boom, commentator Ashley Church says that things like immigration, inflation and foreign buyers don’t matter as much as we think that they do. The key to New Zealand’s historic housing market performance is that the cost of borrowing keeps getting lower, and with record low interest rates set to stay the course, we think he’s definitely on to something.

• While pondering policy in the lead up to New Zealand’s general election, journalist Jenée Tibshraeny illustrates the co-dependent relationship between our residential property market and the financial system, finding that New Zealand-registered bank loans secured against housing comprise 77% of all New Zealand bank assets. This number is enormous by international standards and provides an impetus for the government to continue its support of healthy house price growth.

• Despite comparative data from some property analysts showing buoyancy across Auckland’s housing market, CoreLogic’s Housing Price Index has found values in the city have dropped 1.2% in the three months to August 2020, when compared with the three months prior. While this variation may seem perplexing, differences in origin and methodology including use of the Auckland Council’s rating valuations (not updated since 2017) may account for some of the discrepancies between our major data suppliers.

• With more Kiwis taking advantage of record-low interest rates, mortgage advisor Rupert Gough explains the benefits of an offset mortgage account which can use savings to reduce interest payable while leaving money available for use.

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