Is the NZ housing market set to thrive?

Summary

• NZ property market has been surging and recovering more quickly than anticipated after Alert level 4 lockdown, with the economy and the job market both strengthening gradually.
• As per OneRoof-Valocity data, Auckland housing market surged by 2.8% between August and October but stayed below the remarkable price rise in the same period in 2015 and 2016.
• Low-interest rates, removal of loan to value ratio restrictions and redirection of some money to housing than spending on trips abroad are driving the rise in housing prices.

The housing market of NZ has been surging substantially after the Alert level 4 lockdown ended, partly due to low interest rates, removal of loan to value ratio restrictions temporarily and scarcity of homes for sale.

People are flocking to purchase houses amid recession, with NZ witnessing record-high median prices. 

Nationwide property value growth speeded up in October rising by 1.3% with the increase starting in September, as per property consultant, CoreLogic.

ALSO READ: House prices rise for the first time since COVID-19, CoreLogic Index Back in Green

Wellington was the strongest market that witnessed an increase of 1.7% in October followed by Auckland that saw 1.4% growth taking the average value to a record $1.09 million. Auckland had seen a 1.2% fall in values in 3 months after the end of Alert Level 3 lockdown in May.

Let’s have a look at how the surge in the Auckland housing market is, compared to boom years.

Auckland housing market compared to boom years

Price increases in Auckland are not running as hot as they were in 2016.

As per OneRoof-Valocity data, house prices have soared 2.8% from $880,000 to $905,000 between August and September. 

However, the prices were still lower than the huge price bounces in the same 3 months in 2015 and 2016. Auckland’s house prices soared by 3.6% and 5.1% in 2015 and 2016, respectively.

Many economists were amazed by the rise in housing price as they were anticipating a drop in the prices.

Housing market to continue the boom?

The housing market of NZ failed the post-lockdown predictions, and many economists have been reassessing their predictions of correction in the housing prices next year.

Nick Tuffley ASB Chief Economist stated that ASB anticipates prices to peak at around 12% over the year to June 2021. He stated that people are now reacting to low interest rates and fears about job security have faded away as many of them are now more comfortable about their financial security.

He also noted that an undersupply of housing had a significant role to play in keeping the prices high, and they had a more powerful effect on national house prices than those in Auckland.

Bindi Norwell REINZ Chief Executive stated that the supply issue would remain until the problem of building more houses at scale gets solved. The boom in the housing market will continue as long as demand surpasses supply.

Liz Kendall ANZ Senior Economist stated that low migration and new economic hurdles arising out of COVID-19 could hurt the surging NZ property market.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)