Covid-19: NZ’s property market vs. the world
New Zealand’s residential property market continues to fly in the face of unprecedented economic turmoil – but how has it fared compared to the rest of the world?
We’ve already written at length about why property prices haven’t crashed (yet). Now let’s take a look at what’s been happening in a number of other residential property markets around the world, keeping in mind that every real estate market is its own unique beast, governed by its own set of bespoke regulations and disparate market conditions.
No two markets are exactly alike, but we think you’ll notice some striking similarities between some of these international property markets.
Confidence in the residential housing market is sky high across the ditch, with Westpac reporting a 10.6% increase in its national “time to buy a dwelling” survey this month alone. It now sits at its highest level since over a year ago.
In fact, the bank’s economists now believe that low mortgage rates and a less severe recession will stabilise the market before a solid recovery. They’ve revised their forecast from a 10% drop in residential property prices nationally to a 5% drop this year, followed by a 15% bounce until mid-2023.
That’s right. Despite modest drops this year, they predict that prices will “surge” by 7.5% per year, led by “massive gains” of 20% and 18% in Brisbane and Perth respectively. They have predicted a larger drop and more moderate gains in Victoria, where Covid-19 continues to linger.
They’re not the only economists from a major Australian bank that have had to backtrack on earlier forecasts. In May, Commonwealth Bank predicted house prices to fall 32% over three years; in September, the bank predicted “solid price growth in the second half of 2021 as the economic recovery gains traction”.
It’s a similar story in the United Kingdom, where house prices shot up last month at their fastest annual rate since the aftermath of the Brexit vote in 2016.
According to Nationwide bank, the average UK house price rose by 5% to £226,129 ($439,749) in September compared with the same month last year. Meanwhile, Halifax, another major British banking brand, reports that mortgage applications in the UK have surged to a 12-year high.
According to the Office for National Statistics’ most recent UK House Price Index (August), residential house prices have risen 2.8% annually in England to a record £256,000 ($497,865); they’ve climbed 2.7% in Wales to £173,000 ($336,328); the average price of a home in Scotland is now £155,000 ($300,320), up 0.6%; and house prices have gone up 3% in Northern Ireland to £141,000 ($274,112).
Most market commentators agree that growth in house prices is being driven by, among other things, pent-up demand post-lockdown and historically low interest rates.
Does that sound familiar to anyone?
Want to live and work in your favourite holiday spot? So do increasing numbers of Americans.
As remote working takes off as a result of Covid-19, property experts in the United States have identified a growing trend in people moving to what they call “Zoom towns” – that is popular leisure spots and towns with cheaper property prices, where they can enjoy a higher quality of living.
As a result, places like the Hamptons, Cape Cod, Lake Tahoe, and Aspen are reportedly taking off.
But Zoom towns aren't the only places where home prices are booming. Real estate brokerage Redfin reports that prices are rising pretty much everywhere – except the very expensive cities of Manhattan and San Francisco, where prices have peaked and then plateaued.
Stop us if you’ve heard this all before. Singapore went into lockdown to prevent the further spread of Covid-19. When it got out of lockdown, the city-state’s residential property market sprang back into life, largely as a result of pent-up demand and low-interest rates.
In fact, transaction volumes doubled from their pre-lockdown level as the number of non-landed homes (i.e. apartments and condominiums) hit a two-year high.
Singapore real estate consultancy firm Edmund Tie has noted a trend away from compact units towards more spacious homes – potentially as a result of more employees working from home, rather than the office.
You mightn't have guessed it, but Turkey has topped the list of global property consultancy Knight Frank’s Global House Price Index for Q2 2020. House prices there surged 25.7% year-on-year, and 11.2% over the past three months – though it’s worth noting that inflation currently sits at about 12% there.
Baltic, Central and Eastern European countries dominated the international house price index, with Luxembourg, Lithuania, Estonia, Poland, Slovakia, Ukraine, Czech Republic, Latvia, and Croatia rounding out the top 10.
Interestingly, New Zealand came in at number 11 on the list.
As the report notes, the impact of the pandemic on global housing markets is inconsistent and irregular. Much depends on the state of the housing market prior to the pandemic, the length and severity of any lockdowns, as well as each country’s reliance on international demand.
We’ll continue to watch the international housing market closely with interest.