Home Inspection News – Issue 36

Property News March 2020

Pre Covid19 New Zealand house prices were increasing across the country. Sales numbers were strong especially in Auckland. At the end of March house prices were up 13.7% across New Zealand compared to 12 months ago.

Auckland which had lagged well behind the rest of the country had 5 monthly median price increases in a row and ended at 11.1% above prices 12 months ago.

Record median prices were recorded in:

Auckland up 11.1% to $950,000

Waikato up 13.4% to $600,000

Taranaki up 13.8% to $425,000

Manawatu / Whanganui up 28.7% to $431,250

Northland up 14.1% to $565,000

Tasman up 10.7% to $670,000

Canterbury up 6.8% to $490,000

Southland up 28.2% to $374,500

Sales numbers across New Zealand for March were down 0.6% compared to the previous month but Auckland sales numbers increased 12.8%.

Compared to March 2019 it took 6 days less (now 30 days) on average across New Zealand to sell. In Auckland it took 33 days to sell (9 days less than March 2019).

So What Happens Next? 

Clearly a strong residential housing market was not just emerging – it had
arrived. This is all likely to change because of Covid19. When last months newsletter was written there were 16,500 Covid19 deaths worldwide and none in New Zealand.

As of 20/04/2020, just 4 weeks later the deaths are now over 10 times that number – 165,058 including 12 in New Zealand. There are now over 2,400,000 cases worldwide. Level 4 lockdown will change to level 3 in 1 weeks time and will be reviewed 2 weeks after that.

This will allow more businesses to trade and will include real estate agents and home inspections. Restaurants and gatherings for weddings, concerts, sporting events (spectators) and general travel around New Zealand will still be forbidden.

The indications are that new mortgage lending will be harder to obtain. Banks will be reluctant to lend to borrowers in industries that are most effected by the restrictions – travel, hospitality and many more.

The sheer volume of administration that banks are dealing with such as
changes to mortgage terms, accommodating mortgage “holidays”, moves to interest only payments means they will have little time to process new
mortgage applications.

Clearly this will slow the number of sales. Many other factors may also come into play. For example being “lockdown” in a tiny home or apartment may prompt some to sell and buy a roomier property.

Not every “bubble” will have lived in harmony during the restrictions and
relationship breakdowns may result in property sales. There is likely to be a rise in mortgagee sales especially from people working in the travel and
hospitality sectors.

These will be held down artificially by government support – mortgage
holidays, interest only payments and so on. We had a New Zealand wide
labour shortage in New Zealand at the start of the pandemic, some newly
unemployed will be able to take up jobs in different sectors of the economy.

Massive personal and business support from the government is aimed at
protecting as many jobs as possible. Despite all the effects a lot of jobs will be lost and impact upon peoples ability to afford to own a home.

The Reserve Bank has indicated that it will scrap the LRV (loan to value ratio) requirements that banks have applied to lending. First home buyers and rental investors will likely only need a 10% deposit soon. This is aimed at helping people buy property.

Coupled with the earlier OCR cut of 0.75% to a record 0.25% which will help make housing more affordable. Banks dropped mortgage rates following the OCR cut, a typical 1 year fixed mortgage rate is down to 3.05%.

Investors may think again about buying a rental property to rent out. Better to have “bricks and mortar” than a piece of paper being a share certificate in a Covid19 shattered business – Air New Zealand for example.

Building costs with extra safety measures to combat Covid19 are likely to rise. A lot of factors are at play but property prices are likely to fall a small amount in the coming months and then recover quite quickly. Stay strong New