Well, here we are in level one! Almost as fast as we went into lock-down it feels like we’ve jumped back to normal life. And it looks like market activity is heading back to some sort of normality too with agent appraisals, new listings and bank ordered valuations in June comparing favourably to previous years.

Weekly new listings

In fact, new for sale listings for the last three weeks are tracking right in line with the average over the last 5 years. Such normality during a time that’s anything but normal is actually comfortably reassuring. We’re not seeing a flood of properties coming to market stressed, yet vendors aren’t afraid to list their property for fear of uncertainty. 

The market has certainly not gone through unscathed though as the Real Estate Institute’s data for May has shown. 

Sales volumes in May remained well below previous years, but that’s not surprising given we were at alert level two or three for the entire month, with physical distancing practices still in place throughout.

May Sales Volumes YoY change

When adjusting volumes for non-agent sales as well, we’re reporting a drop of almost 44% nationwide compared to last year, with both Wellington and Christchurch experiencing slightly better bounce-backs compared to the other main centres.

With the drop in sales volumes we need to be cautious of greater volatility in value measures, including house price indices, however for the main centres we can get a reasonable read of where things are at.

And there is now no doubt property values have been impacted by COVID-19.

According to the REINZ house price index, nationwide values dropped by -0.5% in May and are -1.6% down over the last three months. That three month measure is a decent barometer of market performance for those areas with a large enough sample of sales in May – typically the main centres – comparing the relative prices paid in May to back in February, before any uncertainty really hit the market.

3 month change in values

The downturn is evident across most parts. Values in Auckland have dropped -2.1% over the last three months, with the old Auckland City area seeing the greatest drop of -3.3%. Hamilton and Tauranga look to have held their value with a minor increase over the period of 0.7% each, however the monthly drop of -1.8% in Tauranga indicates a softer underbelly to values there.

Wellington City has seen the greatest drop of the main centres over the last three months at -4.1%, which is somewhat of a surprising result considering we were expecting more resilience in the Capital. 

Meanwhile down south Christchurch is down -2.1% and Dunedin down -3.5%. It’s a remarkable turnaround in Dunedin, where strong pre-lock-down demand and limited supply was expected to provide some buoyancy for values.

For now I remain wary of the Queenstown figures due to still-low sales volumes (only 33 in May), but indications are unsurprisingly weak.

So despite a higher-than-expected level of demand emerging out of lock-down level 4, price expectations and perhaps credit worthiness have dropped.

CoreLogic pre-listing index

Looking ahead, we may be getting towards seasonally normal volumes of agent appraisals which will likely mean no major lift in listings through winter. There were signs of displaced autumn activity being pushed into the first couple of weeks of June, however it now looks like that has subsided. We will therefore have to wait until spring to see any noticeable lift in listings volumes. 

In the meantime supply will remain short, which could limit value falls as long as there remains a steady stream of demand.

From a macro-economic perspective, the earlier than expected move to level one has meant some minor revisions in GDP forecasts, but we still need to be prepared for a significant reduction in economic output and concurrent lift in unemployment over the next few months, especially as the wage subsidies end for many businesses.

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