The Property Market February 2020
The performance of the New Zealand residential property market in February was nothing short of stellar. The median house price across New Zealand increased by 14.3% in the last 12 months to a new record of $640,000.
This was the largest percentage increase for almost 4 1/2 years. Every region of New Zealand recorded annual median price increases. The number of properties sold in New Zealand was up 9.2% in the past 12 months to 6,694.
This was the highest number of February sales for the last 4 years. In Auckland the number of sales increased by a whopping 41.6% compared to February 2019. that was the highest February sales numbers for 5 years.
The median days to sell nationally fell by 12 days compared to February 2019 and is now at 35 days – the lowest for 13 years. The number of properties for sale nationally in February was down by 22.3% compared to February 2019.
In normal circumstances prices would continue to increase next month and beyond but we are not in normal times.
Covid19 – What Effects on House Prices and Sales Numbers?
There is now little doubt that the Corona Virus pandemic will cause serious financial stress in many countries around the world.
It is almost certain that New Zealand will have a recession this year (a
recession is defined as 2 consecutive quarters of economic decline = falls in the GDP – Gross Domestic Product).
This is certain to have a negative effect on the house sale numbers. Nervous potential buyers will decide to wait to see what happens before committing to purchase.
There are several big differences today in New Zealand compared to 2008 however when the GFC (Global Financial Crisis) was happening. Back then New Zealand was already in a recession and mortgage rates were over 10%.
Massive over construction of houses had taken place in many countries (eg Ireland) and property prices collapsed when credit dried up. Banks around the world had made very bad loans (100% to buy a house for example) and were very vulnerable to bad debts.
Oil prices rose about 75% just before the GFC. This time oil prices have fallen steeply because of a fuel war between Sandi Arabia and Russia – two of the worlds largest oil producers.
During the GFC people world wide lost confidence in banks because of their bad loans. This is not likely this time as banks have strong liquidity. In New Zealand the household debt was 85% during the GFC, it is now 39%.
Business debt was 85% now 36%, farming debt was 106% now 20%. Finally China is rapidly getting over the virus and ramping back up in production. Certainly a lot of people in New Zealand will loose jobs especially in the
tourist related industries.
The government will cushion the effect and the reserve bank has cut the OCR Official Cash Rate) to an unprecedented 0.25% so mortgage rates will come down.
Things moved very rapidly towards the end of March with 205 cases of Covid19 confirmed in New Zealand. The whole country goes into lockdown on the 25th of March at 11:59pm. Non-essential services are closed.
Clearly the impact on the economy, jobs and the housing market will be huge. Real Estate Agents and House Inspectors are non-essential services, all
practitioners of these and numerous other industries will be confined to
lockdown in their home for at least 4 weeks.
Lets hope that the measures are adhered to by all concerned so kiwis can beat this deadly virus which has killed more than 6,000 people in Italy and 16,500 world-wide (as of the 24/03/2020) and is far from over except perhaps in China.
When the lockdown ends and the virus is under control many jobs will have been lost and the New Zealand economy will take many months to recover. House prices are likely to fall but probably not dramatically.
Sales numbers will be lower for awhile but people need a place to live. The housing market will recover in months rather than years. Strictly obey the
governments rules, many lives depend on you doing so.
Stay safe New Zealand.