Low Mortgage Rates, Removal of LVR’s and Surge in New Listings Cushion the Covid Impact on the Market

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Low Mortgage Rates, Removal of LVR’s and Surge in New Listings Cushion the Covid Impact on the Market

The last two months have seen a welcome return to a healthy market with record-low mortgage rates, removal of LVR’s and a surge in new listings all playing a key role in the market recovery.

According to the Reserve Bank, total monthly new mortgage commitments surged as buyers emerged from lockdown, with $4.318 billion borrowed in May, which was an increase of $1.569 billion (57.1%) from April.

The other significant factor in May was it was the first month since late 2013 without any loan to value ratio (LVR) restrictions in place, which were removed from the first of the month for at least a year in an attempt to get people investing in the market again post-lockdown.

First time buyers were quick to take advantage of the removal of LVR’s and low mortgage rates, accounting for $801 million of the total advanced in May. Of this, $445 million – some 55.5% of the total they borrowed – was for ‘High’ LVR loans – which are above 80% of the value of the properties they were buying.

This is a much higher percentage of high LVR loans than the FHB grouping has been taking up in recent months, with the average percentage normally being around 40% on high LVRs.

And the presence of these new buyers are already being felt in the market with Auckland’s largest real estate agency, Barfoot & Thompson, reporting a buoyant sales month in June, selling 820 residential properties which was up 4.3% on June last year. In addition to this welcomed news, selling prices were relatively stable, with the average selling price edging up to $953,417 in June from $947,707 in May, although it was still below the peak of $993,528 set in March.

Barfoot & Thompson Managing Director Peter Thompson commented on the data, pointing out that the agency’s surge of 1582 new listings in June contributed to the sales increase, “What contributed to the robustness of the market in June was solid new listings at 1582, 56.3% higher than in the same month last year, an influx of first home buyers and undoubtedly some catch-up business from the slow sales in May.”

This surge of new listings on the residential property market was also echoed in data from property sales website Realestate.co.nz, which received 9033 new listings in June –  that was up 19.7% compared to June last year and was the highest number of new listings received in the month of June since the height of the last property boom, in June 2016.

The surge in new listings was even stronger in Auckland where 3559 new listings were received in June which was up 38.9% on June last year.

Realestate.co.nz spokesperson Vanessa Taylor commented that the surge in listings and declining asking prices in June created buyer’s market in Auckland, “When inventory is higher than the 13 year, long term average, it tells us that there is more stock available than people buying property and this signals a buyer’s market.”

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Daniel Vernon