True lockdown impact won’t be understood for months

However, the true effects of the pandemic won’t be known until the months to come.

According to REINZ’s new Residential Confidence Report, which aims to understand the impact COVID-19 has had on the housing market and to track how the market is recovering, the COVID-19 pandemic is entirely unprecedented, with little to compare with, therefore its impact can’t be immediately understood.

“Naturally, some of the indicators became quite marked during April, including a dramatic drop in sales volumes and the percentage of auctions held – although this isn’t entirely surprising given the lockdown. Additionally, median days to sell and listings increased and there was a slight falling in the sales price to valuation ratio,” Bindi Norwell, chief executive at REINZ, said. 

“With some anecdotal evidence that May activity is showing some signs of recovery, that would indicate some positivity. However, with a few more months before the banks’ mortgage ‘holiday’ period comes to an end, it could be some time before we see the true impact on the market.”

When it comes to the buyer’s perspective, Ms Norwell said the biggest difficulty faced during a recession or crisis is how much to pay for a property.

“There tends to be a fear around paying too much for a property as the market begins to find its new normal,” she said.

“Many people anticipate they will be able to get a ‘bargain’ following these sorts of events, so end up making offers far lower than a vendor many expect. This can sometimes end in a multi-offer situation where the reverse ends up happening, and the price of the property is driven up.

“Over the next few months, it will be interesting to see what happens to median prices; some economists are predicting prices will fall up to 15 per cent and others are predicting that the recession may not be as bad as initially estimated – particularly as, unlike during the GFC, we have very low interest rates.

“Unemployment levels will undoubtably affect pricing going forward, particularly when we come to the end of the mortgage holiday period currently provided by the banks.”