The REINZ Residential Confidence Report for April has shown that activity in the real estate industry was extremely subdued due to Covid-19.
In April $1.051 billion of residential property was sold across the country, whereas during a typical April month REINZ would expect to see around $4.358 billion, showing the effect that Alert Level 4 lockdown had on the residential property market in New Zealand.
Unlike other recessions in living memory, such as the Global Financial Crisis in 2008, Covid-19 effectively hit New Zealand in a relatively short space of time with New Zealand’s first case recorded in late February and then just one month later the entire country was placed in lockdown. Therefore, this makes it extremely difficult to look at other recessions to assess what the impact might be on the NZ economy but specifically the real estate sector.
Bindi Norwell, chief executive at REINZ says: “While confidence is important for those working in the real estate profession, confidence in residential property is also closely linked consumer spending patterns, borrowing behaviour and other activities such as individuals’ ability to pay off debt or make investment decisions. Therefore, we felt it was important to start measuring how some of the metrics that impact confidence have been performing.
“Naturally, some of the indicators became quite marked during April, including a dramatic drop in sales volumes and the percentage of auctions held – although this isn’t entirely surprising given the lockdown. Additionally, median days to sell and listings increased and there was a slight falling in the sales price to valuation ratio. However, prices held and, in fact the country experienced a record median price during April,” she continues.
“With some anecdotal evidence that May activity is showing some signs of recovery, that would indicate some positivity. However, with a few more months before the banks’ mortgage ‘holiday’ period comes to an end, it could be some time before we see the true impact on the market.”
Number of properties sold drops to record low
The number of properties sold during April dropped to all-time record lows with just over 1300 properties sold during April. Unsurprisingly, sales volumes dropped steadily over the four weeks, with the last two weeks of the month seeing just over 200 properties sold each week.
A ‘typical’ April month would see around 1600 properties sold each week – even when the usual Easter break, school holidays and Anzac Day are taken into account.
“It was no surprise that April’s sales figures were the lowest on record, but what was surprising was how many properties actually sold during lockdown, especially with some of the tough forecasts economists were predicting. With inspections, auctions and sales negotiations all having to be done virtually, it was impressive that real estate agents were able to complete in excess of 1300 property sales in April,” says Norwell.
“Already, agents have reported a busy start to May trading, but time will tell whether this was a short-term peak of activity, or whether it is more sustained.”
