The 3 factors behind the recent rise in property prices
2020 hasn’t been short of surprises, even the biggest of banks and best of economists have been proven wrong by the current economic situation. Westpac economists predicted a recession following the first lockdown, but the current situation is a complete contrast to that. A Trade Me survey found that 62% of respondents expected house prices to either stabilize or keep increasing and 82% of that same group stated that the election will have no effect on their decision to buy or sell a house.
Westpac were one of the key critics of the post COVID economic situation but as they have now been forced to turn their initial predictions around, the general feel of the market is that people are confident about buying a home. That and they are also afraid of missing out as house prices continue to climb and with Auckland’s median price now at a record high of $950,000, it is showing no signs of stopping just yet.
Kiwis returning home
In the aftermath of COVID, New Zealanders living overseas are looking to return home with predictions stating that over 100,000 of them are expected to move back by the end of this year. Real estate agents around the country have noticed increased offshore enquiries and that sentiment is echoed by Immigration New Zealand who noticed a massive spike in traffic on their ‘buying a home’ page.
These overseas residents are flocking back to New Zealand because the perception of safety that our shores offer has only increased post COVID. Foreign residents are even purchasing properties without viewing them for the purpose of sending their children to study in New Zealand or to move into later. These predictions are backed up by removals companies also noticing the same trend.
Low interest rates
With the biggest of banks having their predictions proved wrong, it is clear that lower interest rates are having a more substantial impact on property prices than was earlier thought. Results from ASB’s housing confidence survey showed that buyers think now is the best time to buy a house since prior to the property boom in 2012. With a large amount of people expecting a further reduction in interest rates, buyers believe this is a good time to avoid the bidding wars and go all in for a home.
The failure of kiwibuild
Another factor that has been driving up the prices of homes is Kiwibuild or rather, the limited success of the initiative. The progress is far behind the initial target of 100,000 homes and currently it would take longer than anticipated to achieve that figure. Earlier in the year, KiwiBuild had completed 393 homes. Critics called it an undeliverable policy and accused the government of raising false hopes. The program is so far off schedule that once complete, the property market will look different to what it does now.
These are three sizable factors that have influenced the soaring prices of the Auckland housing market, some of which have had a larger than anticipated effect on the market.