Lockdown be damned – Auckland market comes out swinging in August

As Auckland comes out of just over three weeks of lockdown at Level 3, many will be surprised to see that the market remained strong throughout, even beating sales records from the same time last year. Mortgage payments for First time buyers have also continued to remain affordable in all regions.

Here’s what you need to know:

Housing market confidence improves as market continues to remain strong

Residential auction activity took an expected dip in the week from 17-23 August, although it remained considerably more buoyant than it was at the same time last year.

The decline in auction activity was entirely restricted to Auckland, due to the restrictions of the level 3 lockdown, with activity in other regions remaining at the impressive previous levels of week prior.

Even though activity in Auckland may have been hindered by the lockdown, 234 residential properties offered up the auctions, which was up by two thirds compared to the corresponding week of last year, where just 141 properties were offered at auctions.

Sale rates have also remained very buoyant at 68% which was almost unchanged from the 66% sales rate the previous week, and well up on the 57% sales rate in the equivalent week of last year. Prices also remained firm, with 84% of the properties selling above their corresponding quotable value, this was up considerably from the same time last year, where just 54% selling prices were above their rating valuations.

The public perception of the housing market has also improved considerably according to ASB's latest Housing Confidence Survey. Views on whether it's a good or bad time to buy a house have swung sharply in favour of buying - the strongest it has been since the beginning of the last property boom in 2012.

The survey, carried out over the three months from May to July, found that 32% of respondents thought it was a good time to buy a house, while 11% thought it was a bad time to buy, 46% thought it was neither a good nor bad time to buy and 11% didn't know.

That was a significant turnaround from the previous survey over the three months from February to April, when the numbers who thought it was a good or bad time to buy were almost evenly balanced at 21% and 22% respectively.

"Views on whether it was a good or bad time to buy a house swung sharply back into positive territory once the Level 4 lockdown was over," ASB's economists said in their commentary accompanying the survey results.

As we come into Level 2 restrictions this week, it will be interesting to see how the local market will react in the coming weeks.

Mortgage payments remain affordable for first home buyers in all regions

Although house prices remain at or near their all-time highs, according to a recent Home Loan Affordability Report, continuing interest rate falls mean mortgage payments remain affordable for typical first home buyers in all regions including Auckland.

The reports show that the average of the two-year fixed mortgage rates charged by the major banks dropped to 2.72% in July after falling for six consecutive months. Twelve months earlier in July 2019 the average two-year fixed rate was 3.81%, and two years ago, in July 2018, it was 4.46%

However, with high sales prices remaining steady, scraping together a deposit will remain a challenge for many, but for those first time buyers who have been saving for several years for a deposit, it’s no wonder that they are continuing to take the plunge into the housing market.

-by Ravi Mehta from Professional Financial Solutions