Podcast: New Data: How Were House Prices Trending Right Before Lockdown | Ep. 230

Posted by Ed McKnight on 29/04/20
How Were House Prices Trending Right Before Lockdown 001
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Listen to the Show

Show Notes

What's Covered in the Show?

In this episode, we discuss recently released data from the Real Estate Institute of New Zealand. This house price and volume data covers properties that settled in the month of March.

March 2020 showed strong house price growth across the country, with particularly promising growth in Auckland and Christchurch.

We also mentioned our property investment webinar, which is coming up this Tuesday. You can register for that webinar here.


Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host Ed McKnight and I'm Andrew Nicol and today on the show we're talking about New Zealand house prices, and in particular the new data that has come out from the Real Estate Institute of New Zealand, just a couple of days ago.

Now this is really interesting. The Real Estate Institute of New Zealand reports on house prices every single month, and at the moment they've just reported on March's activity, the activity in the property market within the month of March. Of course, it takes a couple of weeks to release this data. Now, the most important thing to note before we dive into this is that this data is probably based on properties that have had contracts signed between mid-Feb. and mid-March.

Why do I say that? Because the Real Estate Institute only reports that data once a property has settled, so these are properties that have all settled within March, but that is based on activity within the property market, people signing contracts and going unconditional on properties about two weeks earlier, if we assume a 10 day or 10 business day period from between when somebody signed and when they actually start to settle. So that's really important.

So, it really is representative of the market before the lockdown, which happened kind of late March, that kind of period before it. We won't see the period, data about the lockdown period probably until the 15th of May when REINZ release their new data then. But Andrew, even though this data is only indicative of how the market actually reacted before the lockdown, it was during the time when we were worried about Covid19.

So, tell me what was the market like and what's the data telling us?

Andrew Nicol: Okay. So, there's some interesting stats this month. So, nationally, the prices in the last 12 months have gone from 585 to 665. So that's a 13.7% increase. I actually, as I was going through these numbers, I said to Ed what's really interesting is 13.7% sounds like quite a high capital growth rate, but then if you actually boil that down to numbers as well, it's even more exciting.

So that means that your average person in New Zealand that owns a house, has had $80,000 worth of growth, $80,000. And that's tax free if it's your own house. And that's pretty exciting when you think about the average income in New Zealand's around about 55 K call it around about 40 K by the time you pay your tax, you have made twice as much in your house than what you've made going to work every day and working 40 hours a week which is crazy.

So, by doing nothing, you have been twice as successful as going to work. And then if we look at the numbers, if we exclude Auckland because they always give the numbers with Auckland excluded, it's gone from 490 to 555. So that's an increase of 13.3% or $65,000. $65,000. And if we look Auckland, it's gone from 855 to a new record of 950. That's an increase of $95,000. $95,000 that you've made on your house by just owning it, which is huge.

Ed McKnight: It is indeed. Now I want to talk about some of those record house prices and the reason I want to is because it says some really interesting things about how the market was reacting, which lines up with what we've probably been saying for a while between yourself and me, Andrew. Which is that, Auckland house prices 950 K, yep, that's a lot of money.

But what's important to know is that this is the highest house price median house price ever for the Auckland region. The previous record was in March 2017, so that's three years ago, obviously, where it was 900,000 was the previous record. Now only last month in February, we were talking about that we were really excited that the median house price in Auckland was 885K so over, you know, if you just compare the months, the median house price rose by $65,000 now, of course that's because March does tend to be I hotter month in the property market than February, but it's still a massive increase.

And what I'm most excited about is comparing last year, compared to this year. Sorry, March three years ago, March, 2017 compared to March 2020, because we have had such a leap and what that is kind of telling me is that if the record house prices increased from 900 to 950, some of that demand is coming back into Auckland, that we're starting to see an upturn in house prices. Of course, Auckland has been flat for the last three years since we hit that peak March, 2017 and so having this new record house price set does kind of show that we're getting more of that demand in Auckland and we are going to start to see, or we are likely to start to see some of that lift, or at least we were before Covid.

Now, the other interesting one that I want to talk about is Christchurch city, because of course, Canterbury house prices have been relatively flat over the last three to four years. But we've always said, well, Christchurch is quite under-priced at the moment, and so we're expecting some house prices to lift there. Well, what we've seen between March, 2019 and March, 2020 so in the last 12 months is Christchurch city house prices have increased by 6.6% and we have seen that house prices median house price increased from 469 K to 500,000 so obviously that's a lift of $31,000 so people living in Christchurch city can probably be feeling quite good within that, that they're actually getting some decent lifts in house prices, but also if you're sitting on a house in Christchurch city, then it may be time to just have a re look at the valuation of your property in case you've now got enough usable equity to be able to get into the market.

So, I think it is showing some of that pent-up demand in Auckland and Christchurch that we have been looking for and have been predicting for some time, Andrew, which I think is a really positive sign. Now, the other interesting thing just about Christchurch or Canterbury, I've also seen that over the last month, sorry, over the last year, the days to sell a property in Canterbury has decreased by a week, so it's now down to 29 days to sell a property in Canterbury, that's down from 36 days, same time last year.

Again, another indicator that more heat is coming back to that Canterbury and Christchurch market, which I think is a very positive sign as well. Now the other thing to just re...

Andrew Nicol: The interesting thing about that is that it's 20% faster now to sell in Christchurch. And that's exactly the same for Auckland. It's nine days down from the same time last year. And that also is 20, 21% faster. So, you're selling a property a lot faster. Auckland's volume is up but the rest of the country is down.

So, there is less properties being sold across the country despite those numbers going up, in Auckland they're actually up, in the last month, they were up 12.8%. So, there's an increase on volumes and actually, on an a per annum basis they're up 10% again while the rest of the country is down about 5% and if we exclude Auckland, down 11.

Ed McKnight: And I think this is really indicative of where each region is in the property cycle. Of course, we've been talking for a little while that a lot of the regions are now coming to the end of the property cycle. So I've had some amazing and astonishing growth over the last three to four years, Wellington included within that, and house prices have increased significantly, in fact, in Wellington the median house price has gone up by about $300,000 over just four years.

So, some rampant growth in some property owners there, in around and all the regions, will have done extremely well. Now they're coming to the end of their property cycles. And even if I just look at Gisborne, which previously had been, had amazing growth, amazing capital growth year, year on year, it's only now up 1.3% so, so not a lot.

And there really is indicative of what we're saying is some of these regions are now coming to the end of their property cycles and so we'd expect some of those volumes to decrease and that substantial increase in property prices to just wind back a bit.

The other thing I want to say is just comparing the national median house price this month compared to last month as well. So, last month, February, they median house price in New Zealand was 615 K that had come back from January, which was 640 it's now back up to 665 so that's a 50 K difference within one month.

Now I just want to remind everybody that this is house prices as opposed to valuations of property. So just because the median sale price increased by 50 K it doesn't necessarily mean that the value of your property has increased by 50 K. Why? Because the properties sold obviously in March are different from those properties that were sold in February and March does tend to be a hotter month in terms of house prices, than those early amounts of the year, January, February, where people are still getting back into the market.

So that's important to recognise as well. But it does bode well, particularly, I think for Christchurch city and for places like Auckland where pre Covid19, or I should say pre shutdown really, we were seeing some of that growth coming back. Now, I don't think that necessarily all goes away just because we had the shutdown, because it really is showing about the pent-up demand within that market.

But hey, let's wrap it up there and just before we do wrap it up properly, I want to read out another review that we've had on iTunes and I really liked this one. This one comes from Maxi factor, it's a five star review and they've said finding my why guys really enjoying gaining my daily out and going for a run during the lockdown. Very motivational as we all need a pick me up during these times. We really appreciate that, and I am just so stoked that we'd be considered anybody's pick me up, giving them a bit of motivation. So, keep running.

And of course, please don't forget to rate review, and subscribe to the show. It really does help us get the message out to more people. And if you do leave a review on iTunes or the podcast app from Apple, we will read it out on the show. So please do that.

And don't forget, we do have another webinar coming up next week on Tuesday. Got to drop a link there in the show notes. We'll just keep to Opespartners.co.nz you can register for that there.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.