New Zealand's housing market is recovering well after the COVID-19 lockdown, new data shows - but skyrocketing unemployment and an end to the Government's 'mortgage holidays' scheme could see prices hit hard in the months to come.
The Real Estate Institute of New Zealand (REINZ) made the warning on Friday in its new Residential Confidence Report, which was launched to track the impacts of coronavirus on the housing market.
Data from the report shows just over $1 billion of residential property was sold across New Zealand in April - a record low, and less than a quarter of the $4.4 billion-worth normally sold across the month.
There was also a massive drop in the number of auctions held, a fall in the sales price to valuation ratio and an increase in how long it took to sell property - but REINZ CEO Bindi Norwell says given the country was in lockdown for most of April, this is hardly surprising.
What was surprising was that house prices held across the month, and the country experienced a record median price for April.
"From a buyer's perspective, the biggest difficulty faced during a recession or crisis is how much to pay for a property and there tends to be a fear around paying too much for a property as the market begins to find its new normal," Norwell explained.
"Many people anticipate they will be able to get a bargain following these sorts of events, so end up making offers far lower than a vendor may expect.
"This can sometimes end in a multi-offer situation where the reverse ends up happening, and the price of the property is driven up."
Norwell says real estate agents reported a busy start to May trading, and that there is further "anecdotal evidence" of recovery.
"The number of new listings coming to the market has shown some early signs of recovery," she said.
"Whether this is just an initial surge with people wanting a new house after being in lockdown for four weeks or signs of a recovery, this is a metric that will be watched very closely in the coming weeks."
REINZ says it could be some time before we see the true impact COVID-19 has had on the housing market though, with one of the major causes for concern lying in the potential for further economic damage down the track.
Unemployment, which is anticipated to peak at 9.8 percent in September, will undoubtedly play a role in pushing house prices down.
And an end to mortgage holidays - a six-month policy implemented by the Government to help Kiwi homeowners through COVID-19 - could see them plummet further.
"Over the next few months, it will be interesting to see what happens to median prices," Norwell says.
"Some economists are predicting prices will fall up to 15 percent and others are predicting that the recession may not be as bad as initially estimated - particularly as unlike during the global financial crisis, we have very low interest rates."
Earlier this week, a Quotable Value property price report showed house price growth has slowed across 14 out of 16 New Zealand cities over the last two months.
General manager David Nagel said we'll likely see more listings gradually coming on stream after the cushioning effect of the Government wage subsidy comes to an end and bank mortgage holiday periods expire.
"Unfortunately, this will be when the full impact of the pandemic will be reflected on real estate values," he said.