Market Insight by Mike DelPrete - August 2020
V or W - How will NZ’s Property Market’s COVID Recovery Shape Up?
As the world wrestles with Covid-19, we’re seeing unique shifts in property markets around the globe, revealing the stricter the Lockdown, the faster the recovery.
New Zealand’s property market recovered swiftly from the first wave of Covid-19; REINZ figures show sales volumes last month were up by 24.6% compared to 2019. Tall Poppy Real Estate is reporting strong interest in regions like the Bay of Plenty, Taranaki, Nelson and Kapiti. Last month we reported record results and a 100% increase in sales compared to 2019.
Until Covid-19 re-emerged in August, the country was on track for a true V-shaped recovery, driven by pent-up demand. Our hard and fast Lockdown resulted in an immediate and sharp drop in new listings coming to market. However, once Covid-19 was eliminated and restrictions relaxed, buyer and seller demand returned, and the market quickly recovered.
The United States had a moderate lockdown, but the market there still hasn’t recovered with new listing volumes down 5% compared to last year.
Sweden never really went into Lockdown, with much of the country carrying on as normal. The real estate market followed suit, with new listing volumes only dipping slightly in April and May compared to the same time last year. There is no real market recovery because the market never dropped away like in the U.S. and New Zealand.
Now, the big question is what will happen to New Zealand’s property market as we contend with a second wave. With a quarter of New Zealand under Level 3, our V-shaped recovery may turn into more of a W-shaped recovery.
Unlike earlier this year when our nationwide property market was essentially at a standstill at Level 4, it is still operating under Level 3 in Auckland. Meanwhile, the rest of the country is at Level 2 and the market is still strong. The ‘dip’ on the right of the W will not be as sharp as earlier in the year.
One of the best ways to describe NZ’s property market and its response to Covid-19 is a classic dam analogy.
When you dam a river, the flow stops for a while – in this case, new listings coming to market. But as soon as the dam is taken away, the river surges before eventually returning to a normal flow. We’ve seen the dam and the initial surge in activity, and just as levels were returning to normal we’ve had another Lockdown. Time will tell what impact it has on New Zealand’s property market.