In its latest property focus, released on June 18, the ANZ bank’s economists have noted, “The reopening of the New Zealand economy has made the outlook a little bit brighter. Recently, there has been a bounce in spending and positive anecdotes about the housing market – but we do not expect this positivity to last.
The period ahead is when people on the street will feel the recession in lasting ways. Unemployment is rising and businesses are cautious. It will be a slow economic recovery, which means mortgage rates will be low for a long time.
For some households, this will make home buying and spending more attractive, while for others it presents an opportunity to improve their financial positions.
Although low interest rates will cushion the economic blow to some extent, weaker incomes and reduced job security will weigh on the housing market. The shortage of housing will likely erode, particularly in tourist regions.
We have nudged up our house price forecasts on the back of a slightly better economic outlook and lower mortgage rates, but only slightly. We expect that house prices will fall 12% (only a little above our previous forecast of 13½%), but risks are now considered more balanced.”
The bank economists further added, “There have been reports of busy open homes and strong demand. But listings were low coming out of lockdown. The recent flurry of sales in May took place after relatively few houses were available in April (houses usually take about a month to sell on average). Over this period, the housing market was “tight” and this supported prices, with only a modest decline in house prices (-1.2%) seen since March. More recently, a tick-up in listings has taken place post lockdown, and there are now many more houses available for those looking to buy. Tightness in the market has abated (figure 3). This slackening and an end to the post-lockdown flurry should see more downward pressure on prices emerge in coming months, especially as the economy settles at a weaker trend after the post-lockdown bounce.”
– from ANZ Bank’s Property Focus, June 2020
On the impact of COVID-19 on property values:
“According to the REINZ house price index, nationwide values dropped by -0.5% in May and are -1.6% down over the last three months. That three month measure is a decent barometer of market performance for those areas with a large enough sample of sales in May – typically the main centres – comparing the relative prices paid in May to back in February, before any uncertainty really hit the market.
The downturn is evident across most parts. Values in Auckland have dropped -2.1% over the last three months, with the old Auckland City area seeing the greatest drop of -3.3%. Hamilton and Tauranga look to have held their value with a minor increase over the period of 0.7% each, however the monthly drop of -1.8% in Tauranga indicates a softer underbelly to values there.
Wellington City has seen the greatest drop of the main centres over the last three months at -4.1%, which is somewhat of a surprising result considering we were expecting more resilience in the Capital.
Meanwhile down south Christchurch is down -2.1% and Dunedin down -3.5%. It’s a remarkable turnaround in Dunedin, where strong pre-lock-down demand and limited supply was expected to provide some buoyancy for values.”
– By Nick Goodall, www.corelogic.co.nz