The events that took place last week will go down in the nation’s history. Firstly, the Reserve Bank’s LVR announcements sent shockwaves through the market. Secondly, New Zealand’s evergreen property market continued to grow with Auckland setting a new milestone record.
Now that the dust has settled after last week’s shockwaves, let’s look back and see what exactly happened.
The property market hits new highs
The median house price across the country saw an exponential 19.8% jump over the last year with the price moving up from $605,000 to $725,000. That figure denoted a 5.2% increase over the previous month. Again, Auckland certainly helped lift those figures. However, the spotlight was on some of the country’s smaller cities with places like Gisborne experiencing a 34% increase and Marlborough seeing a 27% climb.
The city of sails crossed a significant milestone over the last week as well where the median price reached $1 million for the first time ever. That figure sees a 16% increase from the same time last year, it was one of 10 regions that saw new record median prices. There was so much going on in fact that Bindi Norwell, CEO of REINZ called October a historic month because of Auckland’s median house price hitting that million-dollar mark. The figure comes as a real surprise considering that the country only came out of the first lockdown barely six months ago. It was a bittersweet week for Norwell who praised the strength of the market but asked questions around the future of affordable housing in Auckland. She also said that the government needs to support greater residential construction quickly and on a large scale.
The Reserve Bank finally steps in
The other big piece of news last week was the Reserve Bank announcing that they are considering reintroducing the LVR (loan to value ratio) restrictions. However, any changes will only come into force from March next year. Many economists criticized this decision saying that it will only cause prices to skyrocket during the summer. This move effectively issues an ultimatum to anyone looking to buy a property, get in before March or get locked out by LVRs.
Economists at ASB echoed the same thought. They believe that people will be forced into using the low interest rates during the summer before LVRs are back. The scenario presents a double edged sword because interest rates are expected to be further lowered once the LVRs are back next year.
All this means more trouble on the horizon for first home buyers who don’t get on the market now!