Market comes back gradually

Malcolm Cox from Cox Partners Estate Agents

As lockdown restrictions eased during May, the New Zealand property market gradually came back to life. There were 74 sales in both Napier and in Hastings during May, almost 4 times the 19 sales recorded in April when Level 4 restrictions brought the market to a standstill.

However, sales were still down by 45.7% compared to the same period last year. This is not surprising given the first 12 days of May Alert Level 3 restrictions meant that agents were allowed only two property viewings, per property, per day. This made it difficult to get interested people through properties.

The REINZ House Price Index, which adjusts for differences in the mix of properties sold and is considered a more reliable indicator of the movement in prices than either median or averages, increased 12.6% year on year in Napier. Hawkes Bay was one of only four regions to see a positive movement in the monthly HPI data.

While the data shows that length of time it took to sell a property increased significantly in May (from 35 to 55 days) this is primarily because during April property viewing was restricted to virtual tours.

This biggest factor dampening demand for and values of property is likely to be a rise in unemployment. Reserve Bank governor Adrian Orr is predicting unemployment will reach around 9%, and house prices will fall by 9% on average.

However, economist Tony Alexander points out that many tend to be overly pessimistic, forgetting about the supportive, insulating factors which encourage recovery (e.g. record low interest rates, the security of residential property and the governments economic simulation). Cameron Bagrie (Bagrie Economics) observes that markets in Hawkes Bay, Gisborne and Southland continue to show strength. Generally, massive price falls are not predicted.

There are however likely to be differences across various price segments. In Hawkes Bay over 70% of properties sell between $400,000 and $800,000, with an average of around $575,000. The number of homes available for sale below $600,000 is significantly less than the level of demand (by over 15%). In this price range strong prices are being sustained by demand pressures, often pushed upward by multiple offers.

On the other hand, the supply of homes for sale above $800,000 is almost double what the local market usually turns over. In the higher price ranges, sellers are already attracting offers at less than pre-covid19 levels. We expect activity will take a couple of months to revive and the data over this time will provide a clearer picture of what to expect.

If you’re looking for a further information about the local real estate market talk with one of the Cox Partners team first, or call me anytime on (06) 835-4321.