The last time we produced this report three months ago, uncertainty about how the property market would emerge from lockdown was still high. Indeed, sales volumes were looking a little fragile, and values themselves had also dropped slightly in certain areas. However, roll forward three months, and it’s been striking how quickly the situation has turned more positive.

In fact, sales volumes in September were nothing but exceptional. The estimated total for both agent and private sales of 9,666 was the single strongest month for more than four years, and it ranks sixth in the list of most active months dating back to May 2007. To be fair, given that year to date volumes are essentially at parity with the same stage in 2019, there is probably still some ‘catch up’ growth taking place after the lull of April/May. Even so, considering the current economic environment, they’re still some impressive sales figures.

Moreover, sales volumes may have been higher still, if not for the shortage of listings actually available on the market. With mortgage credit still accessible, and interest rates low, the strength of buyer demand is not giving that listings situation any time to resolve itself, and this is feeding through into higher prices. The General Election has also obviously been and gone, with no material effect on the market.

The third quarter of the year saw a continued strong presence for first home buyers (FHBs) and mortgaged multiple property owners (MPOs, or investors) in the market, but existing owner-occupiers (movers) continued to sit on the sidelines in many cases. For investors, the ability to enter with a 20% deposit now, rather than the previous 30%, has been a factor – alongside the low returns available on other assets, such as bank deposits. Their share of purchases in Q3 was 26%, the highest since 28% in Q3 2016.

Meanwhile, FHBs are making use of KiwiSaver for their deposits (or at least part of it), while would-be OE’ers who are now instead purchasing a property are also helping to boost overall FHB demand. In fact, the share of property purchases in Q3 made by FHBs was 25%, up from 23% in Q2, and the highest figure in the history of our Buyer Classification series (topping the previous peak of 24% in 2006-07).

Looking at movers, their share of purchases dipped to just 25% in Q3, an historically low level. In some cases, existing owner-occupiers are choosing to stay where they are due to already high debt levels and the extra costs of moving house (such as legal, estate agent etc.). But in other cases, people aren’t moving because they simply can’t find the ideal next property, given the tight supply of available listings. In turn, that is feeding back into an even tighter listings picture.

In terms of property values, most of the country has seen resilience in the past few months, and in many cases further increases (even the previous falls in Queenstown seem to be abating). The national average property value rose by 0.8% in September (to $743,678) and is 2.1% higher than six months ago. The main centres are broadly following that pattern, albeit there are hints that Dunedin’s previously very strong momentum may have slowed a little in the past few months.

In the coming months, there are clearly some risks to be aware of for the property market. Most importantly, the wage subsidy is now wearing off and unemployment could start to rise more significantly. This may affect younger and lower-paid people the most, so could flow through more significantly to the rental side of the property market rather than owner-occupied.

Even so, that risk doesn’t seem enough to knock the property market off course in the short term. After all, the Reserve Bank is doing everything it can to help protect jobs now, and is willing to accept rising asset prices (e.g. houses) as a result of their continued support measures, such as a Funding for Lending Programme and further drops in interest rates.

Earlier in the year, property sales volumes looked like they might be as low as 65,000 for 2020 as a whole, but now they look on track to be about 85,000 – a similar figure to last year. Meanwhile, property values also seem set to continue to rise into 2021. Overall, it’s been a remarkable turnaround in the past three months.