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Summary
- House prices in NZ have been on a persistent rise.
- The relentless pace of property sales continued in February, with total 7964 properties sold in the month.
- Some of the uplift can be due to investors buying property before LVR restrictions return.
House prices have stayed relatively resilient from COVID-19-induced disruptions. The latest numbers released by REINZ reflect that house prices in NZ recorded new highs in February 2021.
The data revealed that 7,964 residential properties were sold last month, up by 14.6% compared to 6,951 properties sold during the same time last year. This has been the peak for the month of February in 14 years.
Bindi Norwell, Chief Executive at REINZ, stated that there was a 34.6% increase in the number of properties sold in February on pcp within Auckland, which has been remarkable given the city went through 4 days of Alert Level 3 in February, and shows the shift to technology to view properties when viewing it physically was restricted.
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Sales volumes for properties sold in the West Coast were also the sharpest that NZ has witnessed in nearly 17 years (+58% on pcp). This can be partly due to affordability and cost of maintaining lifestyle in the area.
National median house prices rose by 22.8% to a record level of $780,000 in February 2021 compared to $635,000 last February. Regionwise, 12 out of 16 regions and 37 districts reached the record median prices.
While median house prices in Auckland also scaled new heights in February, up by 24.3% from $885,000 in February 2020 to $1,100,000, median house prices for NZ excluding Auckland grew by 19.1% to $655,000 last month from $550,000 in February 2020.
Norwell added that the house prices continued to rise relentlessly in February. She stated that some of the rise in sales volumes could be due to investors showing increased interest in buying properties before LVR restrictions returned that month.
Reintroduction of LVR restrictions amid soaring house prices
The loan to value restrictions was temporarily done away with amid COVID-19, but relentless rise in house prices and highly leveraged buyers compelled RBNZ to reintroduce them.
Source: © Terovesalainen | Megapixl.com
The tougher rules would now mean that most investors would need to have a 30% deposit this month to get a loan, but that will increase to 40% in 2 months’ time i.e. in May. First-time home buyers would need to front up a 20% deposit to get a loan.
Mike Jones, Senior Economist at ASB, expects that housing market activity and the speed of price gains would slow down in coming months as credit conditions tighten up due to LVR restrictions.
Kelvin Davidson, Property Economist at CoreLogic, expects that it could take about 6 months or an year to cool off prices.
