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How long will it be before house prices return to pre-lockdown levels? That is the question on the property market's lips following the impact of Covid-19. Zoe Hunter reports.
The property market's bounceback from Covid-19 could be sooner than expected, a property expert believes.
But others say a drop in prices and sales volumes could be the "new normal" for some time.
OneRoof and Valocity tracked the movement of New Zealand house prices after the 2007 Global Financial Crisis and found although house sales dropped quickly, house prices fell only marginally.
Three months before the GFC hit, sales volumes in Tauranga were at 734 and the city's median sale price was $393,500.
Tauranga's house sales fell 39.72 per cent (251) between July 2007 and February 2009. But the median sale price dropped only 5.73 per cent or $22,500.
The lowest the median sale price dropped to was $360,000 in November 2008 before climbing steadily to $385,000 over the next year and reaching $400,000 by the end of 2013.
Sales volumes dropped to as low as 337 in May 2008 and recovered rapidly to 631 by May 2009.
Valocity director of valuation and innovation James Wilson said the investigation was a way to try to understand how the property market behaved during the GFC to determine the impact of Covid-19.
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Wilson said while the GFC was a banking crisis and constrained mortgage finances and Covid-19 was an unprecedented global event affecting all aspects of life - many underlying fundamentals that support the housing market such as banks funding lines, historically-low interest rates and housing shortages remained.
"However, with the escalation of New Zealand to alert level four and the associated lockdown, sales activity is expected to reduce significantly during the initial four-week period. Overall confidence levels are also expected to be reduced as a result."
But OneRoof editor Owen Vaughan said Tauranga's medium sale price dropped only slightly during the GFC and managed to hold years afterwards.
"Although the property market in many cases will be on hold during the lockdown, there are still agents who are connecting with buyers and sellers albeit remotely there is still interest in property," he said.
"It is likely we will see same sales completed and settled once the lockdown is over."
Craigs Investment Partners head of private wealth research, Mark Lister, said the Tauranga market was depressed for years after the GFC and only started to recover in 2015 when Aucklanders began to move to the city.
"If we go into recession, which we are, and unemployment goes up, which it will, house prices will go down without a doubt."
But, he said, that was not the end of the world.
"In the long-term, prices and the economy will recover just like the share market. The million-dollar question is what does that recovery look like?"
Lister said the recovery will be subdued as interest rates fell dramatically coming out of the GFC compared to an already-low interest rate now.
It was a good thing house prices were coming off the boil, Lister said, and his advice to first home buyers was to wait.
"For first home buyers, there is no rush. Time is on your side. As the reality sets in that we are in recession, prices will come down ..."
According to the CoreLogic QV March 2020 House Price Index, the average value of property in Tauranga rose by 0.6 per cent during March and 5.4 per cent year-on-year to $772,443.
CoreLogic senior property economist Kelvin Davidson said although Covid-19 became more prominent last month, the real impact didn't begin to bite until the first day of level 4 lockdown on March 26.
"We're now in a completely different world, with no property settlements that involve the physical movement of people possible until at least the end of the lockdown.
"This will have a major impact on the property market and relevant statistics, but the hope has to be that most sales activity is deferred rather than lost altogether.
Chief executive officer of Bayleys and Eves Realty for the Bay of Plenty, Heath Young, said sales volumes tended to reduce initially as the market worked out the "new normal" and pricing remained steady unless there were long-term trends.
Young said the fundamentals impacting property including immigration, employment, interest rates and new supply would be offset by the million ex-pat Kiwis overseas deciding to come home, Airbnbs coming into the market as long-term rentals or outright sales of those properties.
"Interest rates will remain low and employment will be a factor impacting on decision making but only in the short term."
He believed the region's market would bounce back.
"The Bay of Plenty is no longer a boom and bust economy or retirement belt.
"There are established industry and business along with horticulture and potential conversions of land into food production, which will become a burgeoning industry for the country..."
Young said the region would still be deemed as desirable destinations and there would be more viable options for domestic tourism for Rotorua in particular.
"These will all support recovery against any initial impact on the property market as we emerge from alert level 4."
Real Estate Institute of New Zealand chief executive Bindi Norwell said median house prices in Tauranga and Rotorua fell 10.7 per cent and 18.1 per cent respectively in the first year after the GFC.
But prices increased 5.7 per cent in Tauranga and remained flat in Rotorua, which Norwell said showed the market recovered reasonably quickly.
"Once we move out of the alert level 4 lockdown things will slowly be able to return to normal, but it may still be sometime before we're able to return to large auctions, open homes and rental property viewings," she said.
"But with the added technology we have now, we know the industry will be keen to get back to business as usual as quickly as possible."