New Real Estate Institute data is out: New Zealanders spent $12 billion more buying housing this year than last year, pouring $60.8b in the heated sector.
The annual residential property market review showed a 24.7 per cent rise from $48.7b for the 11 months to last November to $60.8b for the 11 months to last month, according to the Real Estate Institute. Aucklanders splurged even more, spending up 40 per cent from $20.8b last year to $29.2b this year. The national median sale price rose 14.9 per cent from $587,000 to $675,000 in the last 11 months. The national median sale price excluding Auckland rose 13.8 per cent for the 11 months from $496,500 to $565,000. The Auckland median sale price increased 11.4 per cent from $845,000 to $941,000.
Bindi Norwell, REINZ chief executive, cited the impacts of this year’s global pandemic, the various alert levels and lockdowns affecting the property market, “however, not in the way that many people, economists and commentators were initially expecting”. She was referring to banking economists forecasting in March drops of 6 to 9 per cent in house prices.
No international travel was another reason cited. “It has been estimated that approximately $10b that would have been spent on international travel this year has instead stayed in the country and been diverted to other areas, such as property,” Norwell said.
The Reserve Bank’s decision in April to remove LVR restrictions for a 12-month period to support the financial stability in the economy was also cited. “This has been a key factor in invigorating the market, particularly as it approaches re-introduction and buyers hurry to make a purchase before these restrictions are placed again,” Norwell said. Low interest rates had encouraged more investors into the market, as better returns will be made than having the money sit in the bank.
She also cited “the Auckland effect”, referring to the city’s phenomenal price growth. Median prices started lifting last year and reached the $1 million mark in October, she said. Increasing unaffordability was another factor. “New Zealand’s urban housing market is considered severely unaffordable according to the Demographia International Housing Affordability survey, as median house prices are more than seven times the median income,” she said. The continued strength of the regions and price growth there was cited. A lack of supply of properties put pressure on prices in some areas, particularly as buyers in the lower price brackets were priced out of the main centres.
Record low interest rates meant eased accessibility for more first-time buyers, “however, we are still hearing that accessing finance is a barrier for many”. First-time buyers were more active with lending to that group up 26.7 per cent from $1b in October last year to $1.3b in October this year, Norwell said, citing Reserve Bank figures.