How is COVID-19 going to affect the AKL property market?

April and May have been tough months for the New Zealand economy, for businesses and for those who’ve lost their jobs, taken a pay cut or had their hours decreased. Property sales have also slowed down significantly – for obvious reasons.

Now that we’re in level two and we’re starting to come out the other end, lots of Kiwis are wondering how all of this is going to affect the property market. We checked with the experts to help answer that question.

How has COVID-19 affected the property market?

Before COVID-19 struck, average property prices nationwide increased by 13.7% during the year ending March 2020, and Auckland was up by 11.1%. It’s fair to say that the market was in a very strong position – then COVID19 struck.

This April, Barfoot & Thompson’s sales numbers were half of what they were in March, and May is expected to be an even slower month. Despite the lack of sales, Barfoot & Thompson’s Managing Director, Peter Thompson, says it’s not all doom and gloom:

“… those properties sold at prices not far below those in March, which were at their highest levels for more than two years, and for higher prices than they were 12 months previously.”

Thompson also says that sellers are being cautious rather than hasty to exit the market, which is another good sign:

“The low number is also a positive sign for market stability as it does not suggest there is a large number of people who are looking to exit the housing market quickly. Vendors appear to be taking a cautious wait-and-see approach, which is the same trend that occurred in past economic downturns.”

We’re watching the Auckland property market closely. 

What’s in the future for the Auckland property market?

While the early impact of COVID-19 on house prices has been negligible, it’s far from over. The million dollar question is – how will this event affect Auckland’s property market in the future?

OneRoof recently interviewed leading property industry experts and asked them that exact question. The consensus was that there are a few reasons to be optimistic about the market despite the virus, including:

• Six-month mortgage holidays for the major banks (and some non-banks) have already been announced to ensure people aren’t forced to sell their homes during economic hardship.
• Interest rates are at record lows with two major banks announcing fixed rates under 3%.
• The Reserve Bank has just announced that they’re completely scrapping loan to value ratios for the next 12 months.

Things are changing in New Zealand. Is the property market changing too?

Increasing unemployment and economic uncertainty will weigh on the property market for the next several months, it’s true. But despite that, several of the experts interviewed by OneRoof don’t expect a property market crash:

• Mike Pero: “I don’t think there will be too much downturn in the local housing market on the other side of this pandemic.”
• Carey Smith, Ray White chief executive: “For the property market, we see a continuance of sales gradually upon the change of levels and have the expectation that prices will continue to hold.”
• Peter Thompson, Barfoot & Thompson managing director: “… when it comes to the medium term, the outlook is far from negative …. In the last three significant economic downturns – in 1987, 1997 and 2007 – the downturn in the average price of homes never declined by more than 5 percent and prices recovered within 12 to 18 months.”

COVID-19 has introduced a lot of uncertainty into our lives all of a sudden and it’s impossible to definitively know what’s going to happen once this is all over. But with the arrival of level two, we should start to see some normalcy return to our lives and, hopefully, to the Auckland property market too.