We are now entering the second week of Level 1, which for most of the country is essentially a return to normalcy and moving on past the global pandemic that is still crippling the rest of the world. We are now a month since level four was lifted and we are begin to see some data and signs of how the market is looking and recovering, and how the future may look, and as we move forward past the pandemic, how things may change from what we have learned.
Mortgage Rates Drop
One of the first big moves post-lock down was the lowering of the official cash rate, and in the following weeks, it set a fire under the major banks, heating up the mortgage wars between New Zealand’s largest banks. ASB was leading the race at the end of last week, offering a 2.69 per cent over two years fixed on home loans undercutting moves made by rival banks earlier the same week.
Craig Sims, ASB executive general manager retail banking, said the reduced rate would be welcome news for those first-time buyers looking to take advantage of low house prices, “We hope this will help them manage their home loans or enable others to be in a position to get into their first home.” Sims also commented that the bank recognizes that it is a hard time for existing customers, and hoped this would offer some relief, “We’re doing everything we can to support them and make things a little bit easier. We’re confident these new rates will help with that.”
ASB’s main competitors, Westpac and ANZ had both announced earlier in the week that they would cut their one-year fixed-term rate to 2.79 per cent. Echoing sentiments made by Sim, ANZ managing director retail and business banking Ben Kelleher hoped these record low rates would help customers stay afloat in unprecedented times, “These new rates reflect a new reality where many home loan customers are facing uncertain times and our commitment to keeping rates as low as possible to help ease the pressure.”
The current lowest home loan rate on offer is from Kiwi Bank, who announced on Friday that it had cut its one to five year home loan rates by between 34 and 60 basis points, dropping its one-year rate to a record low 2.65%.
House Price Fall Predictions Begin
Just as the banks lower mortgage rates, their behind-the-scenes teams have started to predict how the pandemic will impact house prices. In its latest NZ Property Focus report, ANZ’s economists confirmed their earlier forecast that house prices would likely fall by 10% to 15% this year, compared to an 8% to 10% fall in GDP.
The report stated that uncertainty from such a huge world-effecting crisis such as Covid-19 makes it almost impossible to predict what would be “normal” for the property market under the current conditions but is certain that we are likely to see a significant fall.
Property Sales and Listings slowly begin to increase as lockdown rules begin to ease
Despite the above predictions, it seems that many are returning to the market as house levels rise and sell at their QV value.
House level availability was increasing significantly in post lockdown months, with Barfoot & Thompson receiving 1097 new listings in May, compared to just 239 in April. Stock levels have also remained resilient, with the agency having a total of 3821 residential properties available for sale at the end of May.
Prices also appear to be holding up reasonably well so far, with interest.co.nz able to match selling prices with Rating Valuations (RVs) which revealed that exactly two thirds (67%) of the sales in the last week of May achieved prices that were higher than their RVs, 30% achieved prices below their RVs and 3% were the same as their RVs.