New Zealand house prices hit a new record in February, with the market completely unaware of the pandemic to come. According to figures from the Real Estate Institute of New Zealand (REINZ), prices increased $80,000 nationally over the year, from $560,000 in 2019 to $640,000 in February 2020. Seven regions saw record prices, and New Zealanders were very confident that house prices were going to keep rising. While property prices and confidence will both struggle to some degree, real estate will be more immune to COVID-19 than many other sectors of the economy.
A downturn in the housing market is almost a certainty over coming months according to most experts. However, strong numbers from February are a sign of underlying strong fundamentals that will return when the pandemic passes. Even the sluggish Auckland market managed to rise in value by 4.3%, with median prices going from $851,000 a year ago to $888,000 in February. That was the highest Auckland price in more than four years, and a great indicator of confidence returning to the market.
While everything is changing before our eyes, underlying confidence in the New Zealand market is certainly not an illusion. Just before the coronavirus started to impact global markets, the ASB released its latest housing confidence survey for November 2019-January 2020. During that period, 54% of New Zealanders believed that house prices would increase over the coming year, which was 27% higher than the previous quarter. Confidence in the Auckland market was even sharper, growing from 11% to 42% based on the previous quarter.
According to Bindi Norwell from REINZ, "February was a very buoyant month from a price perspective with median price rises the largest the country has seen in 53 months and record median prices for New Zealand." Sales volumes were also very healthy across the country, up 9.2% annually from 6132 to 6694. Once again, this was the highest result in February for four years. While these numbers are very unlikely to hold their gains in coming months due to COVID-19, they are good news for property owners who may be worried about their biggest asset.
The coronavirus has undoubtedly changed the story for 2020, with a pullback from buyers likely as momentum leaves the market and prices fall to some degree. The housing market does not suffer the same short-term volatility as stocks or currencies, however, with underlying confidence and upwards movement likely to return once things get back to normal. Just like the slope of the COVID-19 transmission curve, the real question is how long we will have to wait and how many people will be affected along the way.
In fact, while most commentators expect a downwards price reaction at some stage, there are still no real signs of a downturn in either house prices or sales volumes. Weekly auction results have remained strong, price expectations are being met, and a drop in the Official Cash Rate has led to a reduction in floating mortgage interest rates. Even if the market starts to feel bumps along with the rest of the New Zealand economy, it may simply be a matter of adjusting your time frame and using your house to self-isolate in the meantime.