Due to New Zealand having been in lockdown since 25th March, it’s absolutely no surprise to see that CoreLogic’s real-time indicators of property market activity (e.g. agent appraisals generated, valuations ordered by lenders) have been weak lately. But with alert level three set to start at midnight Monday, we’ll now be using these metrics to provide timely insights into the strength and duration of the rebound.
At CoreLogic we have the ability to track a wide range of high-frequency measures that provide insights about how the housing market is responding to COVID-19. This article covers the latest NZ statistics, and these figures are starting to show signs of life.
The first chart* shows ‘pre-listing activity’, or comparative market analysis reports generated by estate agents (via our RPNZ product). CMAs are essentially the appraisals provided to clients, which are the first step in real estate activity, and are a lead indicator for listings and sales. As it shows, 2020 was looking pretty steady until late March, i.e. lockdown, then fell sharply. In the past few days, however, a tentative upward trend has emerged – with activity up more than 50% week on week (WoW).
Second we can measure the number of valuations ordered by banks. These valuations are required to process loan applications, and hence are also a lead indicator for sales activity. Again, activity looked solid until late March (blue line), then fell sharply, but is also now showing signs of a pick-up. Canterbury/West Coast has been one of the better performing areas in the past few days, whereas Gisborne/Hawke’s Bay has lagged.
Third we have the types of valuations being ordered through our platforms, which range from the use of instant computer-generated automatic valuation models (AVMs) through to a valuer visiting the property and doing a full market valuation (‘short form’, or ‘long form’ in the case of special conditions). In the previous seven days, 96% of valuations ordered have been AVMs, and there’s been no ‘short form’ orders – not surprising when valuers can’t access properties under the level four lockdown.
Then fourth it’s the purpose of the loans generated from those valuations. Loans for refinancing have dropped about 92% from the same week last year (SWLY) and there’s been almost none related to house purchase – again, not surprising given the lockdown.
So what is the upshot of all of this? Clearly these timely figures have been weak and that’s due entirely to the alert level four lockdown. The more interesting element to all of this will be tracking the data as we move back down through the alerts. CMA generation will no doubt improve and therefore listings. Then we'd expect to see a lift in valuations ordered which will flow through to sales activity itself. Alongside that there’ll probably also be a lift in settlements, from those which were deferred from their original date within the lockdown period. That said, with the original advice from the Law Society being to make this 10 days after we return to level two, this could be a few weeks away.
The million dollar question is what happens after that initial surge and the demand/supply balance finds a ‘new normal’. On that point, we recently ran a survey of the Auckland Property Investors Association’s members (who have holdings spread across the country) and of 270 non-blank responses, it was reassuring that 156 (almost 60%) said that COVID-19 hadn’t changed their plans. Of course, that leaves 40% who have changed plans already and some of those were intending to hold but will now sell, or were intending to buy but will now just hold (or even sell). We’ll dig deeper into these survey results in next week’s Pulse.
* Actual numbers hidden due to commercial sensitivities.