Travel cash ploughed into houses

Further evidence has emerged to back claims that Kiwis have transferred money they would have spent on international travel into property.

The Real Estate Institute’s annual review shows that New Zealanders spent $60.8 billion in the property market during the 11 months to November – $12b higher than the same period last year, and a near-25 per cent increase.

In Auckland, the increase is even higher, with the total rising to $20.8b, up 40.8 per cent.

REINZ chief executive Bindi Norwell said one of the drivers in

2020 had been New Zealand’s closed borders and lack of international travel. Estimates were that about $10b had stayed in the country instead of being spent on international travel, and had been diverted to other areas, such as property, she said.

Nationally, the median sale price for a house rose nearly 15 per cent over the year to date to

$675,000, compared with $587,500 last year.

Another way Covid-19 had disrupted the market was the central bank’s 12-month removal of loan to value ratios (LVRs) in April to support the economy. This had reinvigorated the market, giving buyers a reason to hurry to make a purchase before the restrictions were imposed again, Norwell said.

Low interest rates were another major driver, encouraging more investors into property to get a better return than from the bank.

There was also the ‘‘Auckland effect’’ – the city’s uplift in median prices after 31⁄2 stable years around the $850,000 mark. Median prices reached the $1m mark in October.

At the same time, urban housing across the country has become increasingly unaffordable. The Demographia International Housing Affordability survey put median house prices at more than seven times the median income.

House prices continued to strengthen in the regions, as increased demand and a lack of supply of properties cranked up prices in some areas, particularly for buyers in the lower price brackets.

‘‘We’ve seen record median prices reached in many parts of the country, with November itself seeing 11 new regional records – the likes of which we haven’t seen since October 2003, when the market was seeing significant increases,’’ Norwell said.

FOMO (fear of missing out) had seen the number of house sales spike and stock levels drop, as people feared that if they waited too long, prices would increase too much or options would ‘‘run out’’, Norwell said.

Despite a record low official cash rate and low bank lending rates for first-time buyers, Norwell said she was still hearing that accessing finance was a barrier for many.

First-time buyers became more active in the market, with lending up 26.7 per cent from $1.1b in October last year to $1.39b in October this year, according to the Reserve Bank.