Expert discusses the most likely scenario once restrictions are lifted
Lockdown has not slowed the steady rate of house price growth across the country, but experts say we are unlikely to see the astronomical level of growth experienced over the past 15 months - particularly as some regions are already seeing growth dip into negative figures.
Commenting on the rate of growth over the past few months, CoreLogic head of research Nick Goodall said the property market has proven once more to be resilient. While the rate of growth fell in some regions, he noted that the dip is relatively insignificant compared to how much property values grew over the past year and a half - something which is unlikely to happen again once this lockdown ends.
“It’s been over a month since we went into lockdown, and the property market is once again showing signs of resilience. All eyes are turning to what will happen to the market as the social restrictions continue to loosen,” Goodall said.
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“At the end of August, property value growth had slowed to 5.2%, which is of course still a relatively high rate of growth - but it is down on the recent peak of 8.1% and the end of April.”
“Of most interest from the regional house price index result for August were the few areas to see value change drift into the negatives. Values in Rotorua fell by 2.8% over the last three months, while Kirikiriroa (Hamilton) values have dropped 0.5% over the same period,” he explained.
“For Rotorua, the prolonged period of growth now appears to be taking its toll, with values increasing by almost 50% in the last three years, and most of that in the last year.
“Meanwhile, the strength in value growth momentum appears to be holding firm in Tāmaki Makaurau, with the quarterly rate of growth lifting to 5.7% at the end of August from 5.0% at the end of July.”
Goodall said that while pent up demand over lockdown combined with constraints on supply may put upwards pressure on prices, it is important to remember that our economic settings are different compared to last year. He noted that the Reserve Bank has started to ease away from stimulatory settings, and did not offer measures such as mortgage payment deferrals and lifted LVRs this time around.
Read more: Mortgage rates expected to climb despite record low OCR
With the current Delta outbreak looking relatively contained, the Official Cash Rate (OCR) is likely to be lifted at the next review - something Goodall said will also have a moderating effect on the housing market via increasing mortgage interest rates.
“Long-term, the comparisons to last year’s lockdown and subsequent housing boom are limited,” Goodall said.
“Business and employee support was swift this time, but the other stimulatory factors aren’t present this time around. The quantitative easing programme, which reduced interest rates - alongside the emergency 0.75 basis point drop - has ended, and mortgage rates are already on their way up. Furthermore, the OCR itself is likely to be increased at the next review by the Reserve Bank.
“In absence of these market stimulants, we don’t expect to see the same level of property growth that occurred over the last 15 months.”
