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The Effects of COVID-19 On New Zealand Property Market

20 April 2020

The COVID-19 pandemic added impetus to the New Zealand property market, which was already on an upward climb.

In June last year, the World Bank announced that the COVID-19 pandemic plunged the global economy into the deepest recession seen since the Second World War. You wouldn’t have thought so, looking at the way the New Zealand property market moved in the remaining months of 2020. New records were set, and while their predictions aren’t the same, analysts think that the 2021 market will see continued exciting growth.

According to the New Zealand Herald earlier in January, house prices could climb between 13% and 16%. Westpac’s NZ chief economist, Dominick Stephens, said that annual house price inflation will peak at 16% in June. He also predicted a 12.2% full-year increase over 2021. ASB and BNZ economists, Mike Jones and Stephen Toplis, echoed Stephens’ forecast that high demand and low interest rates would continue as driving forces in the market this year. Jones and Toplis expect to see double-digit growth by December.

The coming months will undoubtedly be exciting, but the question some New Zealanders are asking is: how has the pandemic affected the property market in such a way? Some folks also suggest that while the booming market is good for some people, it’s not good for everyone.

A Dip With Fast Recovery

February 2020 saw New Zealand’s very first COVID-19 case. A little less than a month later, the island country announced its first national lockdown—multiple industries shut down and people stayed at home. The effect on the property market was nothing less than dramatic.

According to, the truncated mean asking price plummeted from February’s near-$860,000, to just under $730,000 in April. However, prices were back on the up by the end of that month.

Growth Amid Uncertainty

The demand for property in New Zealand began to grow again with the start of the gradual easing of lockdown regulations at the end of April. The Reserve Bank cutting the Official Cash Rate (OCR) from 1% to 0.25% in March—a record low—helped the trend. The move meant to steady property prices and support the economy.

Rather than get too excited about it at the time, some real estate agents and analysts were reluctant to count the proverbial chickens before they hatched. After all, there was the prospect of a second wave, extended bans on foreign travel, social distancing, and the ongoing pandemic to contend with.

Owen Vaughan, editor of OneRoof, told the NZ Herald in June that effects of COVID-19 on the New Zealand property market didn’t turn out as bad as some commentators predicted. He explained that the market appeared to have rebounded, although it would be prudent to wait until the end of the wage subsidy scheme and mortgage deferrals before assessing the full impact of the pandemic.

According to the publication, data from OneRoof and Valocity revealed that property values fell by a mere 1% since March, despite the market’s tumble during the four weeks of near-total shutdown. That said, the market’s tenacity was not entirely unexpected, as it had seen robust price growth before the first lockdown. Add low interest rates and high buyer demand to the mix, and you get a property market that appears to defy a global health crisis.

What some real estate agents and landlords didn’t expect in the wake of the first lockdown was an unprecedented surge in rental demand.

Massive Demand For Rentals

The day after NZ Herald published its interview with Vaughan online, Radio New Zealand (RNZ) reported that New Plymouth and Whanganui experienced a sudden, sharp increase in demand from would-be tenants.

According to RNZ, a viewing of a standard three-bedroom house with a double garage attracted the interest of 53 applicants. Property manager at Bayleys’, Kellie Hodson, told the broadcaster that she had six listings available, and had between 20 and 30 applicants for each.

Hodson said that the trend surprised agents, adding that it was an accurate reflexion of what was happening in the market. The property manager explained that the demand for rental homes came as a result of Kiwi families returning to New Zealand as the COVID-19 pandemic continued wreaking havoc around the world. She said that the pandemic had frightened many Kiwis who’d been living abroad, and that they felt safer returning home. Some of these returning individuals traveled from other parts of the country.

The higher rental demand surely gave most landlords something to smile about, but the story’s not entirely happy. Some landlords have struggled with missed payments, relying on insurance policies to cover their costs, and are now facing the prospect of evicting tenants and recouping costs. According to Hodson, there simply aren’t enough homes to meet the increase in demand, so this is an issue too.

In RNZ’s report, the broadcaster said that in Whangui, a two-hour drive from New Plymouth, the interest from folks arriving from out of town posed a challenge for vulnerable people. The local Salvation Army’s transitional housing manager, John Coffey, said that viewing days attracting 40 people made it difficult for his clients to find homes. He added that the core of the issue was the city’s lack of long-term social housing, an issue that’s not limited to Whangui alone.

Upward Trend Distracts From Social Issue

In October, the Guardian reported that New Zealand’s property market saw an 11% increase in median values in the year leading up to September. This may have been good news for owners and investors, but according to the UK-based publication, critics of the news claimed it masked a growing social divide and an increasing number of homeless people.

Those critics also warned that the rapid growth of the property market could cause greater inequality among people. Plus, it could negatively affect New Zealand’s economic well-being in the long run. Investors should have no trouble taking advantage of the more flexible lending requirements and cheaper loans intended for economic stimulation. However, if house prices continue to rise, lower-income groups and first-time buyers will find it increasingly difficult to find affordable homes.

Economist and author Shamubeel Eaqub told the publication that mortgage lending also showed significant growth. On the subject of house prices, he said that some small towns had seen price increases of as much as 40% and rental yields of up to 10%. From Eaqub’s perspective, a lot of what he terms “Generation Rent” went from bad to worse.

The future may not be too bleak, as the Guardian also quoted author David Schnauer, who cited a NZ Herald/Kantar poll that revealed public concern about the hot market. 52% of respondents said that property prices were too high. Of those respondents, more than 46% were over the age of 40.

New Zealand property will continue its vigorous growth this year, but the signs are clear that something has got to give. What, exactly, is anyone’s guess.

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