Impacts of lockdown on the real estate market

Market impacts of an Auckland lockdown

As Auckland gets ready to exit its second Level 4 lockdown, its timely to look at the numbers to see the impact this lockdown had on the local real estate market. 

Auckland’s second lockdown saw new listings fall to about 150 a day in August compared to an average of 300-500. The lockdown impacted house sales volumes which dropped by 21%, but prices stayed high. In Auckland, prices rose 9 per cent from $1.1m in September to $1.2m in October. All Auckland districts showed annual median price growth and six reached record highs.

Thousands of the city’s agents were restricted under the alert levels to working remotely or online. Estimates suggest that just three weeks at level 4 in New Zealand affected nearly 5000 sales, worth a possible $4.8b.

Going back into an extended lockdown has been tough for many Aucklander’s. However, when compared to the first wave of COVID-19, it seems the Kiwi love affair with property has remained strong. Vanessa Williams, spokesperson for realestate.co.nz, says that although they saw a similar trend in April 2020, their site saw a notable difference in browsing behaviour this time around.

“Looking back on the data from April 2020, both visits to our site and the time spent looking at properties dropped initially. It wasn’t a surprise; Kiwis were going through a range of emotions,” said Vanessa. “Then slowly, we started to see time spent on site grow as people started thinking about buying a new home again, and they had more time to spend searching.”

Auckland’s usually congested motorways have been near empty during level 4 restrictions.

Market demand has remained strong throughout lockdown and those who are looking are serious buyers. Underlying drivers such as empty nesters wanting to downsize and investors hungry for a better return on their money are all still in play. Many families are looking for properties with home office space, pools and gyms.

The New Normal

Auckland is starting to return to some sense of normality. However there is still uncertainty on how the future will play out. Europe is battling a ‘fourth wave’ of the pandemic and mandating new lockdowns. A new, possibly more infectious Covid-19 variant, Omicron has started to disrupt the easing of restrictions. 

Lockdowns and open home restrictions make it harder for agents to source leads. It has also made it difficult for vendors to prepare their property for sale. CoreLogic’s data showed that appraisals by real estate agents fell 52% compared to the week before after the lockdown was imposed on August 18.

Under level 4 restrictions no open homes could be held, no physical auctions could be staged, no appraisals done in person, and real estate agency offices were shut. The Auckland region saw a -57.9% drop in new listings through August / October.

18 months after the first lockdown, the industry and public are now accustomed with transacting property remotely and online. Most importantly prospective home buyers have got more time to look online. Video walkthroughs, virtual tours and drone footage are now crucial elements of any property marketing campaign. Quality photography has never been more important and a strong social media presence across Facebook and Instagram is also critical.

During the first lockdown in 2020 many agencies implemented online auctions. This conditioned both vendors and purchasers to a new way of conducting auctions. It also positioned the industry to be able to continue to conduct auctions successfully throughout the second lockdown.

What to expect in 2022

According to the latest data from realestate.co.nz, Ten of New Zealand’s 19 regions hit a 14-year record-high asking prices in October. This has been a continuing trend since COVID-19 reached our shores. Vanessa Williams, spokesperson for the site, says it’s difficult to pin down what might slow climbing asking prices. “There are several factors at play, including low stock, high demand and decades-old legislation that has led the market in this direction.”

Annual price gains have surged to more than 30%. Policy makers have rolled out a raft of measures in an attempt to cool the housing market. In an effort to dampen demand new tax rules for property investors have already been implemented. The Reserve Bank is also restricting the amount of low-deposit lending that banks can undertake. This is impacting on first home buyers ability to gain a foot hold on the property ladder.

After exiting the first lockdown New Zealand saw a property price boom. Economist Tony Alexander has warned to prepare for a second post-lockdown surge of frustrated buyers, with the alert level causing a further property listing drought. There were many factors driving the first boom including very low interest rates, low housing stock and expats returning home. However these factors are not all present this time around. 

Data from November has shown early indications that the rate of growth is starting to ease. Auction pass in rates are starting to climb. It is too early to say whether the Government’s intervention in the market and changes to the OCR are starting to take effect. One group that are definitely feeling the impact is first home buyers. 

The Vanishing First Home Buyer

New Zealand’s mortgage advisors say the number of first home buyers asking for advice on a purchase has now dropped to an all-time low.

The November survey, jointly held by mortgages.co.nz and well-known economist Tony Alexander, shows 26 per cent of advisors were fielding fewer inquiries, compared to the previous monthly survey where only a net 2 per cent felt they were seeing fewer inquiries.

“That’s a significant drop” says Alexander. “it’s the biggest pullback since the monthly survey was launched in June 2020.”

While first home buyers are still actively looking to buy they are also finding banks tightening up their lending criteria. From December 1 banks will be commencing more stringent responsible lending criteria. The direct result will be less young people, self-employed, and over 50’s qualifying for mortgages.

Most tellingly, there is now a record decline in advisor perceptions of bank willingness to lend. A net 85 per cent saying willingness has declined, compared with 75 per cent last month. Only five months ago, advisors were seeing lending willingness increase – so the period since June represents a major shift.

There is also demand from developers for sites 600sqm upwards. Under the Unitary Plan, these sites can now be developed with five or six terrace houses. Developers are willing to pay a higher premium for these classic kiwi homes which are usually the domain of the first home buyer.

Ray White Damerell Group lockdown results

When looking back at what lockdown has meant for us as a business. We have managed to run an amazing 79 online auctions and have completed over 787 appraisals over the last 100 days. Our team is a resilient, hardworking and agile bunch. These results reflect the effort everyone has put in to deliver our customers the best experience possible. Even better, we have managed to onboard an impressive 11 new team members into our business – across various teams and departments  – and our auction clearance rate is considerably higher than the 28% reported in the media just last week.

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