Our 44th edition of Ray White Now welcomes us to uncertain times given that, as a country, we are currently at varied Alert Levels across New Zealand.
Before the changes to the Alert Levels, the New Zealand property market was continuing to make significant progress. Price increases across many regions continued to be strengthened, while the capital city areas were showing less gain but were still remarkably strong compared to previous years.
The gains in prices over the last 12 months have been extraordinary. Nationally the median house price has risen by 25.2 per cent to $826,000, a record across New Zealand property. When we look at property prices, they’ve increased by 23.3 per cent from $557,500 in August last year to a new record of $687,500 in August this year.
The Reserve Bank had their monetary policy statement on 18 August, in which they decided to keep interest rates on hold mainly due to the COVID-19 announcements the day before. The current Official Cash Rate is 0.25 per cent, which has been at that level since March 2020, when there was a significant drop of 0.75 per cent due to the initial COVID-19 outbreak. This was designed to stimulate the market and was a response to a time when the Bank was unsure of the consequences of the pandemic.
While house prices are an important consideration for interest-rate movements, sustainability also plays a role in how the Reserve Bank sets its monetary policy decisions. One of the more connected aspects of the Official Cash Rate is the Consumer Price Index, which has risen to its highest level since mid-2011 at 3.3 per cent. This inflationary effect is an additional burden on the economy and is higher than the inflation target range set over the medium term.
The shortage of properties available for sale is of continuing concern, with the industry having its lowest inventory level ever. The total number of properties available for sale in New Zealand decreased by 31.9 per cent in August 12,249, down from 19,441 in August 2020 – 7,192 fewer properties compared to 12 months ago. This is the lowest level of inventory we’ve ever seen in New Zealand (surpassing the previous record low set in December 2020 at 12,932). For the fourth month in a row, only one region saw an annual uplift in inventory levels – Gisborne, with a 21.4 per cent increase in inventory levels from the same time last year. We will look in more detail at how inventory puts pressure on prices and the overall impact of a lessening inventory portfolio for sellers.
New Zealand’s Consumers Price Index (CPI)
In regard to our Ray White portfolio, we are currently holding 2,911 properties for sale. This is 18.87 per cent down on the same time last year and 22.54 per cent down on the previous year. In aggregate numbers, this sees us holding around 800 fewer properties; however, the number of listings continues to be positive, but given the strength of the buyer market, there is not enough stock replacement for the amount of demand. This, clearly, is an opportunity for those who are considering selling.
For Ray White, in August, residential property sold across New Zealand increased slightly by 7.6 per cent. August 2020 was the first full month of real estate market activity post-lockdown and saw an unusually high level of sales. What we see this August is far more aligned to the usual winter sales numbers, albeit in a highdemand, supply-constrained market.
Looking back on July, where we have complete data for New Zealand, excluding Auckland, the number of properties sold in July decreased by 17.2 per cent compared to last year (5,427 to 4,496). In Auckland, the number of properties sold in July decreased by 0.6 per cent year-onyear (2,708 to 2,691). In July, two regions out of sixteen saw annual increases in sales volumes. Regions with increases were: Northland: +7.8 per cent (218 to 235 – 17 more houses) – the highest for a July month since 2016. Gisborne: +70.6 per cent (34 to 58 – 24 more houses) – the highest for a July month since 2016.
The Reserve Bank released figures showing $8.8 billion worth of mortgages advanced, the highest recorded for July. During the previous 12 months, a hundred billion dollars worth of lending has taken place. Banks are continuing to lend at record levels, and it is now the owner-occupiers doing a lot of the borrowing, and they are the big movers in the share of the lending. The latest Reserve Bank figures show the first home buyers share is now 18.2 per cent, which is lower than the previous month. During July, the total money borrowed by investors was $1.472 billion, which represented 16.7 per cent of the total market. The continuing strong interest of the owner-occupiers continues to show renewed momentum for July. The owner-occupier share rose to 64.1 per cent, with their borrowing capacity reaching $5.65 billion, a residential record for owner-occupiers in July.
In the current conditions, it is difficult to make any reasonable prediction other than what we can see on a daily basis. The amount of enquiry we are receiving on property is at an extraordinary level. Given that viewings and conversations occur online, the opportunity for people to virtually list their property is much more accepted than in the past. Buyers are willing to consider placing offers subject to conditions, allowing the market to continue to operate positively. It will never be as good as unrestricted trading levels, but we encourage those looking to sell to talk with your Ray White representative.
Ray White Now is produced in conjunction with real-time data from our 187 offices across New Zealand. On an annual basis, Ray White completes $20.18 billion worth of property transactions and currently manages a portfolio of 20,045 properties through our property management division.