Real estate shows some immunity to coronavirus crisis

OneRoof’s latest house price figures reflect growing uncertainty in the property market, especially in areas where weakness was evident before Covid-19 struck.

Of the major metros, Dunedin and Wellington saw the biggest value growth in the 12 months to April 2020, while Christchurch and Queenstown house prices barely grew at all.

Dunedin’s median value was up 24.58 per cent year on year to $517,000, a sign that the city’s housing market will be immune to the negative effects of Covid-19 as long as listings remain in short supply and its houses are still seen as affordable compared with the rest of NZ.

Wellington’s median value grew 11.11 per cent year-on-year to $850,000, and although the capital cannot claim affordability as a driving factor in its price growth, it does have the country’s most stable job market and a dearth of new listings to support its market in the months ahead.

Showing steady growth despite a month-long pause on the property market were Hamilton (up 9 per cent year on year to $605,000) and Tauranga (up 6 per cent to $700,000).

Auckland’s housing market had reached almost red-hot levels in the months leading up to Covid-19. The lockdown put the brakes on the market somewhat, although record sales are still being achieved, with one Remuera home selling for $8 million under the hammer last week. Year-on-year growth for April was 3.95 per cent, with property values for the city as a whole hitting $920,000.

Figures tracking the median sale price — which reflect the prices buyers are paying for houses that are on the market — show growth in all regions of the city, with North Shore and Waita¯kere recording the biggest leaps year-on-year (13 per cent and 9 per cent respectively).

As encouraging as those figures are, they should be viewed in context, with big changes in median sale price the likely result of several big sales that may not be reflective of the wider market.

Shortage of stock and buyer demand is likely to support Auckland house prices over the next quarter, although the continued slide in sales volumes is a worrying sign for the market: total sales in the six months to April 2020 was just 7077, compared with 12,209 in the six months before that. The downward trend in Auckland is no different to that seen in the other major metros but Auckland accounts for the bulk of New Zealand sales and figures have dropped 36 per cent between 2015 and 2019.

House values in Christchurch saw little growth over the past 12 months, with median value up just 2.8 per cent to $457,750. That’s not cause for alarm, though, as Christchurch values have been flat for several years now, mostly due to the particular dynamics of the city’s housing market. In its favour, though, is the fact it is a strong employment centre and has a good stock of quality new builds at affordable prices.

The standout statistic is the one measuring year-on-year growth in Queenstown. House values were up just 0.49 per cent on April last year to $1.025 million — a challenge for a city whose tourism-dependent economy has been torn apart by Covid-19.

House-price growth in what is still New Zealand’s most expensive property market was already slowing before the lockdown hit and that weakness is likely to become more apparent as the economic downturn puts pressure on investors and second-home owners, especially those who bought at market peak.

Recent sales show the market may be in for a wild ride. A four-bedroom house with a separate two-bedroom unit sold under the hammer last week for $1.422 million after intense bidding. The sale of 28 Myles Way, in Lower Shotover, was brought forward after a pre-auction offer of $1.3 million was made. However, several days later, at a big auction event, 17 Queenstown properties passed in. Of the 21 on the list, just four sold, mostly for prices around their 2017 rating valuation.

Many of the homes brought to auction on Friday were in Lower Shotover and relatively new. The suburb, about 8.7km outside Queenstown, started life in 2012 when the first of around 900 subdivisions were released to the market. OneRoof figures for April show the median value there has grown 5 per cent year-on-year to $1.06 million and 51.4 per cent since April 2015.

It’s that last figure that should give Queenstown’s market hope. Most homeowners and investors in the city will have seen huge capital growth. And the slowdown in the market may represent the best opportunity for buyers to enter the market. The last time Queenstown prices took a hit was during the global financial crisis when the median sale price dropped from $580,000 in 2007 to $533,500 in 2009 before climbing again. Those who bought at the bottom of the market will have seen house prices shoot up 81 per cent over the following 10 years.

Of the major regions, Gisborne saw the most growth year-on-year, with the median value of all properties rising 30 per cent to $423,500. Affordability is the main driving factor. The same can be said for growth in Southland (up 24 per cent to $340,000), Otago (up 22 per cent to $580,000) and ManawatuWhanganui (up 22 per cent to $415,000).