High prices and strong buyer activity to continue for spring

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It has been a heady ride for the housing market in New Zealand over the pandemic, with the spring season set to see house prices remain high despite the market slowing down. 

Ray White chief economist Nerida Conisbee said buyer activity was set to remain strong throughout spring with a strong demand for property across New Zealand. 

“Not surprisingly, the number of active bidders was low during the first lockdown but once the economy was fully open again in June 2020, active bidding began to increase again,” Ms Conisbee said. 

“There was a bit of a lull over the Christmas/New Year period but then a summer rush of activity occurred.

“Since the start of winter, we have seen a continued pickup in active bidders at auction. 

“New Zealand property is very expensive, but for now it doesn’t seem to be deterring buyers and competition for properties remains strong.” 

Ms Conisbee said the Ray White data showed prices for New Zealand properties showed no sign of declining. 

“The pandemic driven price boom is not unique to New Zealand but in terms of magnitude, it has been the strongest in the OECD,” she said. 

“Following finance restrictions imposed by RBNZ in March, we did see pricing calm, showing that the policy change did have its desired result.

“However, at this stage, our own data is yet to show signs of a substantial fall in pricing. 

“Analysis of Ray White auction data continues to show a large gap between the highest prior offer and the price sold at auction. 

“Historically, this gap has averaged 10 per cent but in July was at 12 per cent. 

“Competition for properties is still strong, not just when we look at the number of active bidders, but also at the prices being paid for properties at auction.” 

While 2021 started off positive for buyers, with the number of new listings exceeding 10,000 for the month, it has since taken a drastic turn making it much harder for buyers to find a property. 

Throughout August, Ray White New Zealand saw 889 new listings come onto the market, a 48.7 per cent decrease compared to the same period last year. 

The decrease in new listings has been met with an increased number of sales 1101, meaning Ray White oversold its portfolio in August by 212. 

With Ray White New Zealand members selling more than they are listing, it impacts the total available listing supply, which is currently 20.84 per cent less than this time last year and 24.24 per cent less than the same period two years ago.

Ms Conisbee said the market was now favouring the seller. 

“In July, properties for sale were down almost 15 per cent compared to the same time last year, and compared to March they were down almost 34 per cent,” Ms Conisbee said. 

“Across the country, the declines were fairly consistent however a slightly bigger decline was recorded on the South Island. 

“As to whether this will continue will in part be driven by lockdowns. It is difficult to sell in a lockdown and this means that sellers generally wait it out. This reduces the stock available. 

“Although historically we have seen a significant uptick in properties for sale once lockdowns end.

Ms Conisbee said what happened to pricing was going to be dependent on two competing factors. 

“The first is whether stock shortages continue, pushing up prices, and the second is whether the greater restrictions on finance lead to a dramatic fall in borrowing.” 

Ms Conisbee said Auckland was the second least affordable city in the world, according to a 2020 study undertaken by Demographia and comparing household incomes to house prices at a global level. 

“Since the study was done, affordability has become even more challenging,” she said.

“Access to finance is a major driver of house prices. 

“The RBNZ has already moved on restricting finance by adjusting loan-to-value ratios for people looking to get a loan. 

“In October, they further plan to lower loan-to-value ratios and implement debt-to-income restrictions or interest rate floors.

“As to the ultimate impact on pricing, it will depend on whether we see more lockdowns, as well as the extent to which borrowers pull back with the restrictions.”