CoreLogic report says property market game has changed; all eyes now on future market measures

CoreLogic releases its New Zealand Property Market and Economic Update for Q1 2021.

The announcement:

The CoreLogic Property Market & Economic Update for Q1 2021 reinforced the heated market conditions which led to the Government’s recent housing policy announcement.

Through the first quarter of 2021 sales activity remained high despite record-low listings, property values rose rapidly, and mortgaged investor participation surged from 27 per cent to a record-high 29 per cent share of purchases.

Kelvin Davidson, Chief Property Economist for CoreLogic, says the figures in the report are a clear “line in the sand” following the game-changing announcement by the Government in the final week of March.

“While the figures in our report largely pre-date the most recent housing policy changes, they are a valuable line in the sand as to where the property market was when the Government stepped in. Now the game has changed especially for investors, so we expect to start seeing through our various market measures how these changes flow through to our buyer classification data and ultimately, property values.”

Davidson says it’s now all about what happens next. “Buyer classification figures will be of most interest to gauge the fallout from the recent changes, particularly volume of investment purchases of existing property and new builds. Speculation about rents increasing and investors racing to sell rental properties is likely unfounded.”

Davidson also notes the mortgage deferral scheme coming to a close, with the majority of people now back on a form of loan repayments without undue strain. In addition, the unemployment rate fell in the fourth quarter of 2020 and at 4.9 per cent is less than half the level that some thought it could be at this stage.

Mr Davidson says “These are positive indicators of the health of our economy, and of course the Australian travel bubble and vaccination programme are also encouraging. However, the economy is not out of the woods yet and we still face a slow recovery to get back to ‘normal’, while also having to face the reality of much higher government debt than before.

“Overall, the recent strength of the property market was always going to be unsustainable and a slowdown likely to occur in the second half of 2021 – the Government changes just reinforce that.

We expect total property sales volumes to be lower in 2021 than they were in 2020 (and potentially fall a bit further again in 2022 too), with property value growth slowing quite markedly too – but not turning negative.

Our expectation that price falls won’t be seen reflects underlying shortages of property around the country, although the incentives for investors to target new-builds should give developers the confidence to keep their output high.”

Source: Corelogic

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