Last week’s REINZ property statistics indicated that lower and lower interest rates are feeding into higher and higher property prices, with buyers taking advantage of low interest rates and serviceability to get into a market that some fear will keep rising. In short, fear of missing out is trumping any concerns that the full extent of economic weakness from the Covid-19 epidemic is yet to be realised.
We might have expected some of the pressure on the housing market to ease with new listings starting to come on to the market in Spring, however, strong demand continues to outweigh inventories meaning that properties continue to sell quickly. REINZ CEO, Bindi Norwell, also noted that we might have expected to see people taking a wait and see approach ahead of the election, but this was not the case.
At a national level, annual house price inflation of 14.7% lifted the national median price to a record $685,000 in September, driven by record median prices in nine of the sixteen regions.
Wellington was one of the regions to register a record median price, following a 13.1% annual increase in the median price to $735,000 in September, from $650,000 a year earlier. As a result, the Wellington region remained the second highest regional price, behind Auckland.
Prices continued their march higher in the Wellington region despite increases in new listings in August and September, with the REINZ observing that the “fear of missing out” is a contributing factor.
Within the region, record median prices were recorded in Wellington City ($862,000), Lower Hutt City ($702,000), Upper Hutt City ($710,000) and Kapiti Coast District ($704,400).
The record median price in Wellington city followed a 6.1% increase in the median price over the year. Just north of Wellington, Porirua City recorded a 3.5% increase in the median price to $725,000.
Record median prices were recorded in Lower Hutt City and Upper Hutt City following strong house price inflation of 18.0% and 25.4% respectively over the year.
Kapiti and the Wairarapa continue to reflect strong interest from people looking to the surrounding districts given the new opportunities to work from home. The median price on the Kapiti Coast reached a record $704,000 in September, following a 14.5% increase over the year.
The Wairarapa echoes similar tight demand/supply dynamics. Carterton, with a median price of $464,000, recorded annual house price inflation of 3.1% on low volumes. Sales volumes were up in Masterton which recorded an 8.8% increase in the median price to $451,500, while South Wairarapa recorded a 33.3% annual increase in the median house price to $653,000.
Overall, sales have plateaued in the Wellington region, following a rebound in June and July. Post lockdown sales eased slightly in September but remained 20.8% higher than prevailing a year earlier.
The Wellington region’s average days to sell fell by 2 days in September to 27 days, reflecting ongoing tightness in the market – this figure is 5 days less than the 10-year average for September of 32 days. This is also reflected in tight inventory levels.
The REINZ made the following observations with respect to the Wellington market:
Listed properties are selling quickly as potential purchasers are experiencing the “fear of missing out” and want to ensure they are able to secure what they want
Demand for good properties is spreading further from Wellington City with people increasingly looking to the surrounding districts and cities as a result of COVID and the new opportunities of working from home
We are yet to see what the long-term impact of COVID will be, but expect the demand and supply issues will continue through the remainder of the year.
Some economists continue to sound a note of caution in housing market commentary that is well reasoned, pointing to challenges associated with weak migration, the end of government support, mortgage holidays drawing to an end and closed borders that are yet to be fully realised. For the moment though, the market is not conforming to reason. Instead, short supply has been met by strong demand and a fear of missing out, underpinned by support from low interest rates, the prospect of rates moving still lower, returning Kiwis, investor interest and first time buyers trying to get into the market.
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