When New Zealand first went into Covid lockdown in March last year property pundits panicked, tipping house prices to plunge by up to 10 per cent.
This time around, no one seems to be sounding the alarm bells, even though Auckland's lockdown is stretching longer and Covid looks set to be among us in the community for good.
So what's happening? Will house prices continue climbing to new heights? How high will interest rates go and how will Covid affect the market?
Our property experts pull out their crystal balls to give their tips.
When the pandemic hit in March last year, Auckland's housing market was just regaining strength after three years of stagnation, while New Zealand prices were continuing their steady climb.
As countries around the world plunged into lockdown, workers were laid off and industries such as tourism ground to a halt, with most pundits tipping house prices to fall between 5-10 per cent.
"Everyone's expectation was that such a huge hit to the economy would naturally see employment fall," said Brad Olsen, principal economist with Infometrics.
"The thinking was that if people lost their jobs they wouldn't be able to hold on to their house or make the repayments and that would force them to sell."
Yet rather than fall, house prices skyrocketed in what has been called the biggest housing boom since the mid-2000s.
Auckland's median house price hit $1.2m in August, up about 26 per cent since the first lockdown in March last year, the Real Estate Institute reported.
National prices jumped similar amounts to hit a median $850,000.
Record-low home loan interest rates - as the Government pushed extra money into the economy to keep people in jobs - played a key role in pushing up prices.
Yet New Zealand's housing market hit a speed bump this past week.
The Reserve Bank lifted the Official Cash Rate for the first time in seven years, taking it from 0.25 per cent to 0.5 per cent.
And more rises look likely as the Reserve Bank tries to keep down rising costs in the economy.
It tips the OCR could rise to around 2 per cent by the second half of 2023.
That means Kiwis could soon be paying significantly more interest on their home loans - money that builds up significantly over the course of a 30-year repayment plan.
Kelvin Davidson, chief property economist at analysts CoreLogic, said, "it's not hard to imagine" popular one- or two-year fixed home loans reaching 4 per cent by the end of next year.
Economists at Westpac bank have long argued that interest rates are highly influential in determining whether New Zealand house prices rise or fall.
However, Infometrics' Olsen said that although higher interest rates would be likely to lessen demand among home buyers, they weren't likely to cause a major market shock, given they would be still well below pre-Covid rates.
"The banks have stress-tested people to make sure they can still make repayments at higher thresholds so we're not as worried as some about a massive shock to house prices," he said.
But what about the impact of Auckland's drawn out lockdown, which now seems likely to spread to other parts of the country?
Currently, the labour market is "tight", wages are starting to rise and lockdowns did not appear to be causing widespread job losses, Olsen said.
"People aren't losing their jobs, can still afford their houses so for many there is a lot less reason to sell."
Loan Market mortgage adviser Bruce Patten said his team had more than 130 customers ask about whether the banks could suspend interest payments on their home loans during the first lockdown.
This lockdown they had only had one customer make the request.
CoreLogic head of research Nick Goodall believed the real estate industry was much better set up to operate remotely this lockdown, saying his team had noticed an early sign that real estate agents were highly active again.
The number of agents using CoreLogic's software to estimate the value of new homes about to go on sale had now returned the same levels as just before the latest lockdown, he said.
As house prices skyrocketed this year, the Government stepped up efforts to encourage property investors to move out of housing and into other investments.
The aim was to try to slow house price growth and give first-home buyers a better shot at being able to afford to buy.
Government measures included hitting investors with new taxes, making it tougher for them to get loans from banks and introducing new tenancy rules favouring renters.
Economist Tony Alexander - who runs surveys among a 23,000 subscriber database - said that it was too early to tell definitively whether some investors were stepping back from the market.
However, survey responses investors, real estate agents and mortgage brokers indicated it was likely some were, he said.
Loan Market's Patten confirmed his team were receiving fewer enquiries from investors.
However, Alexander said that given investors had averaged 7 per cent capital gains every year since 1992, any potential move by them away from housing is likely to be gradual.
First-home buyers are also feeling the squeeze, Patten said.
They are likely to face new Reserve Bank rules that will result in banks giving out fewer loans to first-home buyers with small deposits of less than 20 per cent of the value of the homes they want to buy.
A report by ANZ economists in July described the challenge facing first-home buyers to save a deposit and get into the market as "simply bonkers".
It describes a scenario where someone who bought a house a year ago for $1 million with a 20 per cent deposit and fixed the $800,000 mortgage at 3 per cent would have made more than $275,000 on paper after interest costs in the year to June 30.
But for a prospective buyer who was unable to get enough of a deposit together, their savings goal will have increased by another $60,000 just to maintain their purchasing power to buy the same house.
"That's an extra $165 in savings per day required just to stay still, versus an unrealised gain of more than $750 per day for those lucky enough to be on the other side of this," the economists noted.
They estimate house prices are now running at more than 10.5 times the median disposable income.
Despite the challenges for investors and first-home buyers, Loan Market's Patten said prices were still running hot at recent online Auckland auctions as owner-occupiers were becoming more active.
Where does that leave house prices?
CoreLogic's Davidson said he believed house prices were near their peak with further growth easing off for the rest of 2021 and into 2022.
"With unemployment low and in the absence of a GFC-style credit crunch, a full-on property downturn still seems unlikely – especially since the expected end point for interest rates will still be low by historical standards," he said.
Westpac economists said it was likely it would take a bigger jump in interest rates to cause a meaningful cooling or drop in house prices.
However, Reserve Bank Governor Adrian Orr believed increased house building, low population growth and rising interest rates would have a bigger impact on prices.
"We expect house price inflation to moderate significantly in the period ahead," he said.
"In our projections, house prices are assumed to eventually fall as momentum in the housing market fades."
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