Editorial: Summer property market set to sizzle

Another property goes under the hammer in a steaming real estate market. Photo / Supplied

EDITORIAL

At the beginning of this year, it was widely felt 2020 was shaping up as a boom time for the property market, with a summer-long run of lifts in all 16 regions of the country.

Then came the Covid pandemic and lockdowns, and what happened? The market ran headlong into a runaway hot mess.

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This week, a three-bedroom house in one of Auckland's most sought-after suburbs went to auction after only a week on the market and sold on the first bid or $4.128 million.

The agent said the buyers were a local family, already in Remuera, who were prepared to pay the price to secure it.

That's perhaps the phrase at the moment: "pay the price". As the thousands out trudging through open homes this weekend will attest, there are no bargains.

If anything, the juggernaut housing market could soar to unprecedented heights this summer as home buyers scramble to beat tougher home loan lending rules.

House prices were already running at record levels in recent months as houses sold for hundreds of thousands of dollars above council valuations and another Remuera home even fetched $4.4 million this week despite being described as a do-up.

Further fuel has been poured on the fire by two Reserve Bank announcements.

The government-backed bank said it was considering bringing forward restrictions on so-called loan-to-value-ratios - to March, a move experts said could rush property investors into the market in greater numbers.

The Reserve Bank also planned to lend more cheap money to commercial banks, meaning more money to in turn lend to home buyers.

Some point to a lack of supply in housing as driving the rise in prices but that is only a small part of the story. Those who blamed rampant immigration were clearly mistaken as inbound migrants have reduced to a trickle.

Westpac economist Dominick Stephens says: "Over the past three decades the biggest contributor to rising house prices in New Zealand has been a dramatic change in interest rates, and I think what's going on right now is proof of that."

Expect banks to keep the heat on all summer long, urged on by a government and officials keen to keep the economy from stalling.