Auckland's recovery from the Covid-19 crisis could happen sooner than many expect, research from OneRoof suggests.
Figures from OneRoof's latest Property Report show house prices in Auckland were on an upward trajectory before a nationwide lockdown put values on hold, with median property values in Auckland City and the North Shore up a healthy 5 per cent in the three months before March 26.
Now the market is open for business again, the big questions buyers and sellers will be asking are: How hard will prices fall and how long before the market returns to pre-lockdown levels?
The virus is expected to have a damaging effect on the economy, and most forecasts indicate price fluctuations in at-risk regions, but research from OneRoof and its data partner, Valocity, suggests the future isn't as bleak as Kiwis fear.
OneRoof and Valocity tracked the movement of New Zealand house prices after the 2007 GFC and found that while the number of house sales dropped quickly and steeply, house prices fell only marginally.
OneRoof editor Owen Vaughan said: "Given the current uncertainty within the housing market, we wanted to see if there were any lessons that could be learned from the GFC.
"While it's important to note that the coronavirus and the GFC are very different in terms of their causes, reach and impact — the GFC was a banking crisis and constrained mortgage finances, whereas Covid-19 is an unprecedented global event that has affected all aspects of life — there are some similarities that will give hope to homeowners worried about future property values.
"Many of the underlying fundamentals that support the housing market remain in place: banks funding lines, historically low interest rates and housing shortages within key locations, although unemployment will be the key stress factor in the months ahead."
OneRoof and Valocity found that in April 2007, three months before the GFC hit, sales volumes in New Zealand were at a peak of 26,836, while the median sale price for the country was $350,000.
The median sale price continued to rise through to August 2007 but sales volumes dropped 31.39 per cent.
Valocity director of valuation James Wilson says: "The rapid decline in sales was driven by market 'fear' and reduced access to bank funding. However, the median sales prices rose to $357,500 in August 2007. While the majority of buyers and sellers hit pause during the initial months of the crisis, there was still little driving down the median sale price. In fact, the median sale price continued to rise to $360,000 in December 2007 before hovering between $347,000 and $355,000 over the next 12 months."
The research found that the lowest the median sale price dropped to post-GFC was $340,000 in February 2009. After that, and following a post-recession boost, the sale price climbed steadily to $370,000 over the next eight months and stayed around that level for the next year-and-a-half. Sales volumes dropped to as low as 11,500 and hovered between 12,000 and 15,000 over the same period.
Vaughan said: "What the figures showed us was a big drop in the initial months of the crisis and a total of 22 months of softening sales volume and values from the peak of sales volumes, but that house prices did not suffer the same steep declines. In fact, prices dropped just 4.23 per cent.
"While there are a range of reasons for this, what shielded prices the most was that the major metros did not have a significant oversupply of housing stock, which was the case in other countries, and the lowering of interest rates."
The OneRoof and Valocity research found that Auckland suffered the biggest fall in sales, down 49.43 per cent between July 2007 and February 2009, the city saw only a 4.64 per cent decline in the median sale price during the same period.
Queenstown experienced the biggest decline in median sales price — down 6.31 per cent — but Wilson says this perhaps reflected the city was more traditionally aligned to international housing markets.
Wilson said the research also found that lower value housing stock fell away from sales volumes more than more expensive houses.
"Nationwide, sales of houses in the $750,000-plus bracket didn't drop more than 40 per cent. Houses sales of between $250,000 and $500,000 dropped more than 50 per cent," he said.
In Auckland, the number of house sales below $1 million fell away by 55 per cent, while in Wellington, the biggest holds where for more affordable stock.
Vaughan said: "Markets where there was more speculative behaviour — i.e investors purchasing lower priced stock in large volumes — saw bigger drop-offs in more affordable house sales.
"In Wellington, there was less speculation and more houses being bought as homes rather than investments."