Record-low interest rates, increased savings and returning expats are giving Kiwis more reasons to buy property despite the COVID-19 pandemic and an election looming, latest figures show.
According to the Real Estate Institute of New Zealand (REINZ), the number of properties sold in September reached a 42-month high, at 8377 homes nationwide. Compared to the same time last year, sales were up 37.1 percent. In Auckland, they were up 53.2 percent.
REINZ chief executive Bindi Norwell said before an election, buyers typically sit on their hands. But not this year. Last month saw the highest number of properties sold in a September month for 14 years.
"2020 appears to continue in its trend of being an anomaly, with the number of properties sold the highest in 42 months, since March 2017," Norwell said.
The COVID-19 pandemic has caused widespread uncertainty. But the property market has a few things in its favour.
Mortgage interest rates from just under 2 percent make borrowing cheaper. Closed borders and COVID-19 restrictions have caused discretionary spending to fall, increasing savings. Expats returning home - and a shortage of listings - increases demand, causing prices to rise.
"When you add high levels of confidence in the housing market, the removal of LVR's (loan-to-value ratios) in March and people's fear that prices are going to keep increasing, this explains why people are going to such lengths to secure a property now," Norwell added.
National median house price compared to Auckland
Nationwide, the median house price hit a new record high of $685,000 in September, up $10,000 compared to the previous month and 14.7 percent year-on-year.
Auckland prices rose 12.6 percent year-on-year to a median of $955,000, also a record.
In addition to Auckland, record prices were set in nine regions. The top three were Gisborne, up 45.8 percent year-on-year to $560,000, Taranaki, up 21.3 percent to $485,000 and Otago, up 20.7 percent to $590,000.
Property prices in the Waikato have grown for five consecutive months, reaching a median of $635,000 in September. Taranaki and Manawatu/Wanganui had three consecutive months of record prices.
"These sort of price increases have continued to defy even the most bullish of market commentators, but with no uplift in the total pool of properties available for sale, at this point it looks as if prices will continue to rise as we head toward Christmas," Norwell added.
Days to sell
The median number of days it took to sell properties in September was 32: 4 days' less than September 2019. For Auckland properties, it was 36 days.
Auctions were used to sell 16.5 percent of properties nationwide, with 1381 sold under the hammer. Of all properties sold in Gisborne, almost three-quarters (74.4 percent) of properties were sold by auction, with the remainder sold by negotiation or tender. In contrast, just over one-quarter (27.9 percent) sold via auction in Auckland.
Rising house prices highlight shortage
The data also showed that the number of properties selling for under $500,000 dropped to under a quarter year-on-year, from 36.3 percent to 24.9 percent.
Infometrics economist Brad Olsen, said rising prices highlight the housing shortage.
"With more people looking for a house at present, lured in by lower mortgage costs, rising house prices are driving a further wedge between those with housing assets and those without," Olsen said.
The 'wealth effect' of higher house prices can encourage spending, which is good for the economy. But those gains are only on paper. Soaring house prices at a time when the economy is struggling due to COVID-19 is a sign change is needed.
"With the state housing waitlist ballooning in recent years as housing pressures have mounted, there's still a significant need to boost housing supply through new building," Olsen added.