Christchurch Real Estate: August Update
Harcourts’ South Island Regional Manager, Jim Davis, comments on the Christchurch real estate market.
With the release in the last 24 hours of the latest REINZ data relating to sales made in August, the public here in New Zealand can be forgiven for being completely confused.
Literally a few days prior to the release of the latest actual sales data, headlines in mainstream media were quoting a major property valuation source as saying, “Lockdown won’t lead to a fresh housing market boom”. Similar comments were echoed by other spokespeople from some of the online portals indicating that the trend for asking prices was flattening and perhaps dropping in some cases. This type of market commentary no doubt gave a few souls hope that the rampant property market we were experiencing prior to the latest lockdowns was perhaps slowing. However, reality will have once again hit home with the release of August sales data from REINZ. The facts show that nine of the 12 regions around the country hit new record highs in terms of sale prices. In fact, the REINZ headline and data shows that the latest lockdown has not dampened demand for or confidence in the housing market. If anything, the latest lockdowns are exacerbating the issues.
By now it would be apparent to most people that our primary issue within the market is a simple case of supply and demand, and that is not a simple issue to resolve, let alone resolve quickly. The demand side is driven, in my opinion, primarily from the housing shortage. It is a combination of the shortage we had prior to the outbreak of Covid in early 2020 magnified by the simple fact that MIQ turns out 4,000 odd beds twice a month with Kiwis returning to New Zealand. These people also need somewhere to live. Low interest rates, readily available money, and all the myriad of other aspects of life that usually create some demand for houses are just additional influences that are further impacting on the basic underlying reason for the initial demand. People are typically not purchasing houses just to have them sit empty. Whether you are an owner or an investor, you are in the market for property because you are wanting to have people living in the property. Consequently, when we are required to go into lockdown, the consequences of this are effectively just like a dam in a river, everything builds up until the dam is released or else it will overflow naturally. As well as the dam effect, lockdowns are also hindering the supply chain and slowing the ability of the housing industry to get the materials they need to at least attempt to add to the country’s housing stock.
With these latest lockdown measures we have seen examples of exactly what I am alluding too. Prior to this latest lockdown, the market had been racing along. As a result, more and more people had been adopting auctions as the preferred method of sale, to the extent that here in Christchurch over 50% of all Harcourts listed property were auction listings. When lockdown occurred, the market was able to continue to a greater or lesser extent. As a result, we still saw a bit of ‘business as usual’ but done in a different way. Online auctions, virtual appraisals and electronic online signing options have all come to the fore. Clients who had opted to have their property marketed by auction were still able to achieve sales via the online auction processes, which companies like Harcourts had the foresight to put in place earlier in the year. This enabled owners to have their property sold, and just as importantly, allowed buyers to purchase their dream home despite Covid restrictions.
While a large part of August was spent in a Level 4 lockdown, Christchurch City still recorded an amazing volume of sales. The REINZ data shows there were 509 recorded industry sales which is a significant number and very close to the 547 recorded for August 2019 before Covid started skewing the market. The frightening part, however, is the new record median for Christchurch of $650,000. This is up from the record figure of $600,000 last month. Logic would dictate that at some stage these increases will slow, but with Christchurch and the surrounding areas still being reported as ‘undervalued’ that logic may not apply for some time.
A further look at the figures achieved over August also indicate how well Harcourts’ systems and processes are working for those sellers who choose to utilise the ‘Harcourts way’ when it comes to selling their #1 possession.
The REINZ data tells us the average sale price of the 509 properties sold by all the companies was $725,339. The median was $650,000 as previously mentioned. When we look at just the Harcourts data, we see an average sale price of $815,808 and a median sale price of $720,000.
When you factor in that Harcourts are responsible for the majority of the property sales this past month, the ‘Harcourts way’ looks to be doing something right for our clients. This is borne out by the number of people choosing to take advantage of our Harcourts systems and procedures as shown by this snapshot from realestate.co.nz website taken earlier this week.
Where to from here? The reality is no one knows for sure, however, by applying the same reasoning that I have mentioned above to the current situation in New Zealand, I would assume and predict that the current situation in our market will continue for some time yet. While MIQ remains fully booked, and the supply chains and skilled labour availability in the trades remain under pressure, we simply will not be able to build houses fast enough to meet current and projected future demand. As a result of these factors alone, we would predict that the market will continue along similar lines, with an ongoing excess of demand over supply. What is currently happening across New Zealand is not unique to us and is in fact being replicated literally around the globe currently. Harcourts has always been in the business of selling property for our clients and our systems, training and processes are designed to achieve the best possible result, as our legal and fiduciary duty requires. If you are looking to sell your home in this current market, our results speak for themselves. Give your local Harcourts office a call. Currently I think the ‘Harcourts way’ is showing itself to be the best way.