Unsurprisingly, the number of properties sold across New Zealand dropped significantly in April, according to the Real Estate Institute. Will low interest rates provide stimulus to the property market? Here’s what some economists expect for the next few months.
Property prices have held up
With the country being in complete lockdown for most of April, annual sales numbers were down 78.5 per cent nationally (and down 82.4 per cent excluding Auckland)
Despite lower sales volumes, property prices held up. The national median house price rose by 17.2 per cent year-on-year to $680,000, and three regions (Hawke’s Bay, Nelson and Wellington) recorded all-time-highest median prices.
However, REINZ chief executive Bindi Norwell warned that these figures should be interpreted with caution: “Looking into the details of these regions, it’s more to do with uplifts in the upper sales price brackets than an uplift in the underlying value in these regions.”
All eyes are on May indicators
Now that real estate activity has been allowed to resume, experts are waiting to see how the market will respond in the next months.
Despite good levels of interest from buyers, Norwell said property data is unlikely to show significant signs of recovery in May. “We caution over being too optimistic until we get a few more months’ data, as many of the sales in April will have been negotiated during March, so it’s likely to be another month or so until we really see the full impact of the lockdown.”
Low interest rates and easing property prices may give some buyers a helping hand, but rising unemployment, zero migration and tightening credit availability from banks could dampen demand.
Economist Cameron Bagrie, among others, expects the market to ease back, adding that the strong price growth we’ve seen over the past 12 months is unlikely to continue. While low mortgage rates may offer ‘a crutch of support’, Bagrie said, the market performance will also depend on New Zealanders’ financial situation and employment levels.
ANZ chief economist Sharon Zollner echoed the same sentiment: “The low mortgage rates we’re seeing at the moment will definitely be sparking some interest. But the fact is we do see the unemployment rate rising to double digits later this year and that typically does put quite a lot of pressure on the housing market.”
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