How high can Auckland property prices go? Photo / Doug Sherring
How high can Auckland property prices go? Photo / Doug Sherring
EDITORIAL
The "for sale" and then promptly "sold" signs sprouting up around Auckland's suburbs are symptoms of a Covid-linked surge in house prices even as the virus keeps the world in limbo.
There are different theories from property watchers on why the market is bubbling. Important factors are that interestrates are low and there's an ongoing housing shortage.
Westpac New Zealand chief executive David McLean called it a "sugar rush" driven by low interest rates. "I think it is not a bad thing at this time, when we are going through this Covid thing because it does boost consumer confidence among people who own houses already."
But he said high house prices made it hard for people to get homes and increase inequality.
A report last month showed the average asking price for houses is at a 13-year high. In Auckland, the average asking price is above $1 million and prices are high in other North Island regions.
OneRoof reports Bindi Norwell, REINZ's chief executive, saying record low interest rates and a shortage of listings are key drivers. "Ultimately, we'd like to see New Zealand have a long-term stable property market, but until we start to see more listings come to market and start to build more properties at scale, we're likely to see values increase across most parts of the country at least in the short to medium term."
Bindi Norwell from REINZ. Photo / Fiona Goodall, Getty Images
As with all considerations, the pandemic lurks in the background as a factor.
Some people could be reacting to the pandemic uncertainty - and also not being able to use funds to travel overseas - and instead investing saved money in houses.
For others, the coronavirus has forced life and job changes which might require moving home.
Even the trend to working from home could be a factor in property moves - such as more space for work areas in the house or the location, considering much more time is being spent there.
The impact of the coronavirus on the job market has not been as bad as feared but that may change.
The virus is having another bite at major economic powers in Europe and the United States. Those regions face a difficult next four months during colder weather. Countries such as France, Germany and Britain have reintroduced restrictions. That could cause further economic disruption and more returnees.
New Zealand's population has spiked, with Kiwis returning home because of the coronavirus, and they are looking for places.
Lesley Harris, from the First Home Buyers Club, said New Zealand has become an attractive place to come back to, so there is probably more demand, OneRoof reported. "I don't think we've seen the overall impact yet on our economy and we haven't seen the overall impact on global economies. It's surging around the world and we've got it fairly well under control but New Zealand isn't an isolated economy."
It's a reminder to the new Government and Housing Minister of the ongoing headache of limited affordable housing, and the struggle for younger people to get into home ownership.
Wider acceptance of remote working would allow some people to seek out cheaper homes in towns outside the main centres. Holiday homes could become remote-work rentals.
Reserve Bank Governor Adrian Orr has dropped a strong hint about restoring Loan to Value Ratio restrictions. Something has to give.
Low incomes, high house prices, a supply shortage and an uncertain economic future is the worst combination for people wanting homes of their own.
