A new property report has reinforced just how hot the New Zealand market was before the Government's housing announcement.
Property analyst firm CoreLogic released its Property Market & Economic Update on Thursday morning which showed property values rose rapidly during the first quarter of 2021.
On the CoreLogic House Price Index, average property values across New Zealand have now hit $845,491, up by 16.1 percent year on year.
"There are obviously a multitude of reasons for that sharp rise," the report said.
"Including of course low mortgage rates and the lack of available listings on the market, but also other factors such as the lack of attractive alternatives (e.g. term deposits) for investors and also the inability of people to go overseas and spend money on holidays - therefore prompting them to look at other uses for their funds.
"That has widened the gap between property owners (the 'haves') and would-be owners, increasing the political pressure on the Government to 'do something'."
House price growth experienced the largest gains in the regions, but main cities have accelerated too.
Of New Zealand's 66 main territorial authorities (excluding Chatham Islands), 61 saw double-digit average property value growth in the year to March.
Tararua had the highest growth (36.4 percent), followed by Rangitikei (35.9 percent), South Taranaki (33.1 percent), and Masterton (31.0 percent).
Sales activity also remained high in Q1, despite a lack of property listings, and mortgaged investor participation surged from 27 percent to a record-high 29 percent share of purchases.
Chief property economist Kelvin Davidson said the report showed a clear change following the Government's housing announcement.
"While the figures in our report largely pre-date the most recent housing policy changes, they are a valuable line in the sand as to where the property market was when the Government stepped in," he said. "Now the game has changed especially for investors, so we expect to start seeing through our various market measures how these changes flow through to our buyer classification data and ultimately, property values."
He said Kiwis will now be looking at how the housing announcement affects the property market.
But overall there are "positive indicators of the health of our economy", he said, noting the recent trans-Tasman travel bubble.
"However, the economy is not out of the woods yet and we still face a slow recovery to get back to 'normal', while also having to face the reality of much higher government debt than before.
"Overall, the recent strength of the property market was always going to be unsustainable and a slowdown likely to occur in the second half of 2021 - the Government changes just reinforce that. We expect total property sales volumes to be lower in 2021 than they were in 2020 (and potentially fall a bit further again in 2022 too), with property value growth slowing quite markedly too - but not turning negative. Our expectation that price falls won't be seen reflects underlying shortages of property around the country, although the incentives for investors to target new-builds should give developers the confidence to keep their output high."