Christchurch Market Update - APRIL 2021
For many businesses, the end of March signifies the end of another financial year. This in turn tends to trigger intense activity in the real estate industry across the country. When this extra interest and activity coincides with a galloping real estate market, like the one we are currently experiencing, the latest market figures make for astonishing reading.
Remember that these latest results were achieved prior to re-cent moves by the Government in an attempt to slow down the New Zealand housing market. So, any “hoped for” effect that the Government’s moves might look to achieve have not been factored into these March statistics.
Looking at the March figures for Harcourts across our city, I can only say the results are staggering. The activity from both buyers and sellers over March was frenetic. Following on from the strong listings in February, Harcourts had another huge month of bringing new stock to the market. In fact, March was the second biggest listing month in the last 4-5 years.
Having a rush of new stock available to purchase has been great for all the buyers out there in the market. With plenty of new stock comes plenty of sales, with the result being that Harcourts settled 665 property transactions this past month. We must go back to 2007 to find a month with more sales activity than this.
There is no doubt that sales prices have continued their upwards rise over the last month and we also see a marked lift on the average sale price achieved for our sellers. So following a near record month for Harcourts sales data, with near record listing numbers, sales volumes and prices achieved, it comes as no surprise that the just released Christchurch sales data from the REINZ also shows new record levels achieved during March.
The most recent REINZ data is led by a compelling headline, “Highest number of properties sold in a March for 14 years.” For all the reasons that are well known to everyone, the market across the country literally took off again over March. The statistics nationally and locally will not make welcome reading for the Government or people looking to purchase in the current climate. Here in Christchurch the figures are equally strong. Overall, there were 918 recorded sales for March. This number is up some 40% compared to March a year ago, and remember March 2020 was at 95% of pre lockdown figures.
The median sale price reported for Christchurch is now $600,000, obviously also a new high and up 20% on a year ago. The reported Days on The Market is down to 24 days, a new low, but this is a meaningless statistic. We all know the market is moving at a fast rate.
Other market information that makes interesting reading is that for the first time over one-third of all properties sold nationally were sold by auction. This is in line with the trend we have seen from our Har-courts listings here in Christchurch. Over the last six months or so, close to 50% of all our property for sale has been listed as an auction. There is no doubt that the market locally and nationally has favoured this method of sale to achieve the best possible outcome for everyone involved.
While this market information relates to March, you will be aware that in the last week of March the Gov-ernment announced new measures that they hope will slow the activity and rapid price growth in the market. The range of measures are aimed primarily at what they call the investor end of the market. The main measures introduced that will cause a potential rethink in this sector of the market are the removal of the ability of landlords to claim their interest payments against the income generated by their proper-ties and the extension of the Brightline test to 10 years.
These measures will certainly cause a few investors, or individuals, to rethink their strategy. The extension of the Brightline test, while being nothing more than a quasi-capital gains tax, will not have a huge effect on a person with a genuine “purchasing a property for my retirement” attitude.
The removal of the tax deductibility status will influence some investors however, particularly the highly geared investors. While it may serve to slow down additional acquisition by some investors, I think that the rapid rise in prices over recent months was doing that anyway. The fact that the investor is better served by purchasing a new build under the new rules bodes well in the long term for the rental market. The possibility now exists that any investor deciding to shed property will sell their base stock back into the marketplace and replace or top up with newer, more modern housing. As with any tinkering, this can also create pluses and minuses, especially if investors were to turn all their attention to the new build and spec market.
I have no expectation that prices will drop away dramatically. I personally believe the underlying lack of stock and huge demand will not disappear quickly. As a result, I cannot see prices dropping away much… if at all. The current rapid gains may slow down, and we are seeing signs of that, as buyers look to take a breath. But equally I expect them to get a second wind sometime. If investors pull back a bit, it will only make life easier for the home buyer. However, don’t expect that scenario to last. An investor, like the market, will ultimately adapt to whatever the market conditions are and at some point, decide it’s time to get involved again. Remember we are still short tens of thousands of homes here in New Zealand, and they will not be replaced quickly.
In summary, at the time of writing this report there is no clear pattern emerging as to whether the Government’s measures are having an effect. I suspect it will take a few months before we see a clearer picture emerging. At the coal face we are still busy, there is still plenty of activity and property is selling. The complication is that at this time of year, in the month of April, we have Easter and school holidays which interrupt out real estate activity and we traditionally see a dip following a hectic March. There is no doubt that this April will be no different from the norm. I just think it will take a little bit longer before we can determine whether the Government’s changes are having a real effect.