THE POST COVID SOUND BITES
THE POST COVID SOUND BITES
Are you reading or listening to media sound bites about the property market about to drop? Are you reading sales are down and the property market about to drop further? I would suggest you don’t!
I have written a few times on why I think that the market will rise again quickly and I stand by those comments.
Let’s look at the published data. The number of properties sold in May 2020 across New Zealand decreased by 46.6% from the same time last year – from 7,477 to 3,990 with median days to sell at 58 days which is longer than usual.
The media, as normal, are making a big thing about these figures largely to get a sound bite that will sell newspapers, and increase viewership, and to be honest they are doing a good job of scaring the mass market. But let’s address the elephant in the room…The figures are just very misleading.
The data is only a point in time and it’s always published a month behind and in this case due to COVID-19 it’s even further behind.
This is no blight on the data, its just the way it is collected and collated. The figures may come out in early June. But the sales are from the month earlier which obviously was May. Let’s look at this in a bit more depth. Most houses take more than a few weeks to go unconditional once a contract is put together. So when was the contract put together- it’s looking more like April in this scenario?
On the 23rd of March the Prime Minister made the announcement that New Zealand was to transition immediately to Level 3 - Restrict, and to prepare to move to Alert Level 4 - Eliminate, by midnight Wednesday the 25th of March 2020. This meant a nationwide lockdown for four weeks - something not seen before in New Zealand's history.
So, the last week of March and all of April were in unprecedented times and guess what? There were very, very few contracts written during this time. Just a side note – unless if you were selling through Proppy.co.nz which really didn’t miss a beat as their online auctions and online negotiating were running as per normal during lockdown. Most other agencies were locked out in the cold. Therefore, the drop of 46% in sales was always going to happen. To be honest, it’s a very good result!
There were very few auctions, no photography services (non-essential), no building reports completed and no bank valuations. Traditional real estate agencies struggled to get contracts signed & weren’t even able to open their doors - so obviously there was going to be a huge drop in sales!
Out of these skewed figures maybe one figure is worth looking at and that is median prices nationally rose to $620,000 - up from $580,000 (+ 6.9% year-on-year). Therefore, prices still held up nicely. I think as we come out of this pandemic shambles you will see people coming back into the market, fuelled with low -rate mortgages and will be buying for their families or investment properties. We are already seeing it with record attendance to open homes in Auckland and Gisborne to name a couple.
I would suggest that you look at July 2020 figures (June) and more importantly August’s (July) property reports for a more accurate picture.
What is becoming very apparent out of lock down is there are a lot of buyers actively looking right now. Online Auctions, Online Negotiations are still performing very well with many people still not wanting to physically go into offices of bricks ‘n mortar offices. Our latest online auction on last Thursday, performed extremely well in Hamilton.
Open homes seem very busy which is a very good indication of activity. What that means is people certainly have appetite to buy post Covid but sellers are fence sitting with listings & feeling sluggish. With the reasons outlined above I wouldn’t be reading into the media sound bites and I would consider selling into a very buoyant market right now.
I spoke about this a few weeks ago - you need all ends of a property market to function. With the introduction of a Labour government nearly three years ago, the conversation about capital gains taxes being introduced and the need for higher deposits (20%) required, essentially locked the unfortunate first home buyers out of the market. But, guess who are now back in huge numbers?
The first home buyers ‘are back.’ They can now feel comfortable that interest rates are low, and deposit requirements are much less than they were. In this industry, which the government doesn’t entirely understand, you need a fully functional market. You need all ends of the market working. For example, First Home buyers that purchase their first homes, in turn that means the middle of the market who they normally purchase from are selling and buying maybe a higher end or family home. This then means the upper end of the market is working. You obviously have the investors buying and selling through the market at all ends & not scared of Capital Gains and the like. I think the market is springing to life post Covid-19. What do you think?
Good luck out there! Think for yourself, is my advice. Don’t let sound bites make you regret not making decisions. Timing is everything and the time feels very good right now!