Short commentary on Eastern Suburbs' real estate market statistics for March 2020 + COVID-19 Impact
This 4 weeks lockdown has affected most of us, be it physically, emotionally or financially. However, while we do feel the pain, we all know that it was done to keep all of us safe and nothing matters more than health at the end of the day.
While we will be looking at statistics in March for this article, bear in mind that these statistics may no longer be relevant given that we are entering a different market after the lockdown is lifted.
If you are impatient (!), you can skip to the relevant sections:
– Eastern Suburbs’ housing market statistics and general market observations (covering Orakei, Mission Bay, Remuera, St Heliers, Glendowie, Kohimarama, Meadowbank, St Johns)
Auckland's property market statistics for March 2020
Compared to February 2020
Compared to March 2019
- Median price up 11.1%
- Sales count up 10.8%
- Days to sell decreased by 6 days
- Median price up 7.3%
- Sales count up 12.8%
- Days to sell decreased by 9 days
Auckland market as a whole
March was a fantastic month for Auckland homeowners who had their properties on the market.
Median house prices increased by 11.1% to a new record price of $950,000, eclipsing the last record median price set back in March 2017. It marked the 5th consecutive month of year on year growth, following two years of stable prices.
The number of properties sold also increased by more than 10% both month on month and year on year (and this is the highest number of residential properties sold in the last 4 months). This is a clear reflection that homeowners had confidence in the property market and listed their home which ended up selling for a good price.
The median number of days to sell also decreased, as a result of the aforementioned confidence in the market.
Suffice to say, the property market was on an uphill trend prior to the lockdown.
Eastern Bays' and Remuera's market statistics and general observations
Covering the real estate markets of Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, St Johns, Epsom and Mt Wellington
Note 1: Suburbs with less than 5 sales will not have the median property price displayed for statistical and privacy reasons. Also, note that the median property price for each suburb may see large fluctuations given the relatively low number of sales on a monthly basis.
Note 2: The REINZ uses unconditional sales data (when the price is agreed) rather than at settlement, which can often be weeks later. It is therefore more accurate and timely.
Note 3: Epsom’s statistics are provided for general reference for homeowners based in those areas and are not included in the overall “Eastern Bays & Remuera” numbers.
Trends in Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank and St Johns real estate markets
March saw a great month for the Remuera & Eastern Suburbs with almost a 30% increase in number of houses sold. Median price continued to be on the upward trajectory and is more than $100,000 higher than the same time last year.
Now that we are in lockdown, obviously it means that people cannot view houses and transactions are less likely to occur. That is not to say that they don’t at all — our office had 2 sales go unconditional (off the plans) and a house in Remuera sold via online auction during the lockdown.
While most people are stuck at home during the lockdown, we have not been sitting idle. We are getting on average 2-3 inquiries on each of our 9 listings every day.
This shows that buyers are still out there looking and in fact there are many buyers just waiting for the lockdown to be lifted so that they can start viewing the houses.
Some buyers have started to ask about a “COVID-19 price” given the current environment and sensing that there may be an opportunity. Some bargain-hunting investors are starting to re-enter the market.
Other buyers recognise that this is a good opportunity to buy but are not insisting that there should be a discount because:
- either they need to move in time for school zones or
- their pre-approval will expire soon or
- they were recent immigrants to NZ and have just fulfilled their OIA requirements to buy as a Permanent Resident. These are buyers who have substantial savings over a long period.
These buyers are looking at good locations in Remuera and the Eastern Bays precisely because they are fearful that the market might be headed downhill and they want to buy in locations that will hold value in the long term.
That makes our suburbs the most likely to perform well in such circumstances.
So Is Now A Good Time To...
So Is Now A Good Time To Sell In The Eastern Bays and Remuera?
What's The Coronavirus Going To Do?
The novel coronavirus that causes COVID-19 has upended many systems around the world and we can see the devastating effects it is having on people in United States and the UK. Now that we are (hopefully) at the end of our 4 week lockdown, New Zealand is very fortunate, with the cooperation of 5 million of us, to have a low rate of infections and death toll.
Global free-flowing travel is likely to be out of the question for possibly 12-18 months until a vaccine is developed.
Let’s look at how the real estate market could be affected by this pandemic by reviewing some demand and supply factors.
Constrained Supply factors:
- Some homeowners are now taking a wait and see approach and would rather sell when the market improves.
- Continued shortage of land in core central Auckland suburbs. Fall in prices tend to occur the most to outlying suburbs and the CBD apartment markets.
- Homeowners not in a desperate position to sell because of a) Government’s Wage Subsidy and b) Bank’s willingness to assist in such difficult times which extends to granting interest only loans and 6 months mortgage deferral holidays. This means there won’t be a surge of desperate homeowners coming onto the market and wanting to sell for any price. This has traditionally led to a downhill trend in prices.
Positive Demand factors:
- Ultra-low historical interest rates – and likely going lower – the Official Cash Rate has been cut to 0.25% in an emergency meeting by the Reserve Bank of New Zealand and likely to remain the same for the next 12 months
- The capital increase on banks that were supposed to be started in July 2020 has just been postponed to July 2021. This is great news as that means the banks would have additional amounts of money to lend (as opposed to being locked up in additional capital)
- The low interest rates makes owning one’s home more attractive than renting.
- Safe-haven status conferred on real estate, especially in New Zealand, compared to other asset classes such as stocks and bonds which are far more volatile (as seen in the past week). Even gold prices fell!
- Think of the incredible support that the New Zealand government and the banks have supported housing (as an asset class), with mortgage payment deferments and hardship claim consideration. If you own a wine or art collection, you don’t see them saying “Let’s try to help out since the value has gone down 25%.”
- Everyone needs somwhere to live – virus or otherwise.
- The housing stock for sale will be more attractive to many than what is for rent (which makes buying and owning one’s home always more attractive). Immigration remains positive (i.e. no sign of exodus, especially with a global lockdown) and with how New Zealand has handled the situation compared to the rest of the world, it is going to be more attractive – we might get more returning Kiwis! The Chinese buyers will be looking closely at New Zealand (compared to the USA and Europe) and thinking that that’s a safer place to be sending their kids to study or invest in.
- China is recovering and reopening factories and its businesses
- It’s not like the 2008 great financial crisis. 2008 was a credit crisis but that’s not happening now and banks are not (yet) seizing up. Back then, housing prices were already declining for 2 years prior to the GFC. Today’s situation is a demand shock, with people withdrawing from the market and the supply chain being disrupted. More importantly, it’s temporary. We’ll get through this. There will be a vaccine developed eventually and activity will resume.
Negative Demand factors:
- Substantive decline in the stock market, reducing Kiwisaver balances and just general confidence. People will often want to wait for the market to settle before making a big purchase or decision. (But money from the stock market can be and is often redirected into real estate and other assets)
- Closure of businesses, especially in the retail and tourism sectors which have been hard hit by the Level 4 status imposed by the New Zealand government. This may have a ‘trickle-down’ effect such as increasing unemployment and tightening of budgets, which will affect non-essential purchases such as luxury homes. Business are also cutting back on costs and there have been numerous news reports of them reducing their employees by 10% or asking their employees to take a pay cut.
- Worsening of the situation and continued drag, especially in the Eurozone and United States, on the global economy and a slow recovery which will heavily impact our export markets.
So what do we think will happen?
- Buyers might emerge from this lockdown with a different requirement for their next home. This prolonged and enforced work-from-home situation might make them realise that (1) working from home is desirable and workable and (2) a dedicated office/study room is critical for them, especially one that is further away from the children so that they can have some peace and quiet while working.
- Homeowners might also reassess the suitability of their home to their needs. After starting at their 4 walls for 4 weeks, they might think it’s too small to fit the whole family or it’s getting too big and tedious to tidy up/maintain, especially if another lockdown happens.
- The number of buyers around may decrease. There will still be buyers who need to buy for various reasons outlined above and will see this as a good opportunity to buy without intense competition from numerous other buyers. What we will see is quality over quantity. The number of open home attendees may drop (or open homes may not even be able to run) but those who do arrange for inspections are motivated and serious buyers.
- If you are thinking whether should you sell or should you wait, here’s a fundamental truth – if you are selling and buying in the same market, you will be fine. In fact, if you are upgrading in this market, it is even beneficial for you because of the ‘trade-up premium‘. For example, if the current house you are selling is $1M and the next house you are buying is $1.5M. A 10% drop across the property market would mean that the house you are currently selling is $900K and the house you are looking to buy is $1,35M, and so you just made $50K (difference between $500K then and $450K now) thanks to the market. A winner? We sure think so.
- We also strongly believe in the first-mover advantage. You must be first and well-positioned to catch the wave of pent-up buyer demand. (Or if you believe that the market is declining, then you need to catch the last of motivated buyers and before the glut of properties that will hit the market.)
- Smart buyers and investors are still to emerge, thoroughly convinced about the ‘one-way bet’ nature of property given the immense government support. The banks are highly invested in real estate in New Zealand. Real estate is always going to have huge support from the government, from the regulators, and the banks are highly connected in making sure the values of real estate in New Zealand are properly maintained.
- Think about your life plans, and act accordingly. This recovery process might be long drawn and it could be years before we see the economy picking back up as businesses will be wary of taking on new employees and increasing expenditure as everyone will remain wary of having to go back into lockdown. This means consumers and businesses will want to build up extra savings in case of the same thing happening again, until a vaccine is successfully developed. So if you can’t wait for long, then perhaps now is the best time to act.
- Don’t try to time the market. Focus on choosing the best agents who can market it using modern and unique marketing strategies which will be especially attractive in this age as people spend more time at home in front of their digital screens and only visit the properties which they are serious about. Think Facebook Live videos, targeted digital marketing, live virtual tours of your property and the use of video to meet with potential buyers etc. Make sure your preferred agent can adapt and keep up with the latest technologies to snare that buyer.
- Know that it’s business as usual for us. We have been operating remotely and used digital marketing strategies since our inception, so are very well-versed and adept at advertising properties online. What’s new to others is routine for us. Our ability to reach your buyers when they are at home has not diminished, and has in fact increased. Our website traffic has tripled during this period. In fact, given that many buyers are stuck at home, this is the best time to leverage social media and online platforms to get in front of them.
So Is Now A Good Time To Buy In The Eastern Bays and Remuera?
It depends on your personal circumstances. This whole Covid-19 pandemic has not affected everyone equally. While some have lost their job, others are incredibly busy. These are people in the medical field, IT industry and food delivery services (like My Food Bag). They are seeing an spectacular increase in their business turnover and revenues. Like any point in the economic cycle, there are winners and losers.
So if you think that your job/business is relatively secure, then this is the perfect storm to buy in. Just like those people who have bought during the GFC and are enjoying the gains right now, this is now the opportunity for you to grab with both hands.
Here are some key tips:
- get your mortgage approval sorted ASAP – banks are taking a longer while to process mortgage applications and are turning down new-to-bank applications
- if you already have mortgage pre-approvals, make sure this is valid
- let your real estate agents know that you have mortgage pre-approvals. As we enter Alert Level 3 lockdown, traditional open homes are out of the question and probably only private viewings will take place. Time is scarce and vendors do not take kindly to opening up doors non-stop to unqualified buyers.
- take your time to research the key areas you are looking to buy in and focus on specific suburb statistics. There’s no point in thinking that the market is collapsing in the CBD apartment market when you are buying a family home in a leafy suburb like Remuera, Glendowie, St Heliers, Kohimarama, Orakei or Mission Bay.
- If you are renting, with record low interest rates, it may be cheaper to buy than rent.
- Understand the trade-up premium if you are selling and upgrading. You are always buying and selling in the same market, so you are financially better off if you can buy a higher-priced property for a 10% discount and sell your current (cheaper) property for a 10% discount.
If you are reading the ‘skies are falling’ articles online, just know that these articles are not new. They have been published every year (in some variant or another) but the proof is in the facts – what has the property market done through the years?
Will you be the smart buyer or the scared buyer?
Good luck with your new purchase.
Take The Seller Quiz Below!
Found this post useful and have more questions?
We have detailed statistics at my fingertips, including recent sales within the Eastern Bays and Central Auckland suburbs, so do not hesitate to contact us for a no-obligation discussion over coffee on your future plans to either buy or sell.