Will house prices soar after lockdown like last year?

New Zealand’s housing market is unlikely to experience the sustained high level of value growth witnessed in the aftermath of last year’s level four lockdown, a property expert says.

According to figures from QV, the average house price in New Zealand jumped from $752,327 in April 2020 – at the start of the first COVID-19 lockdown – to $913,209 a year later. By that point average quarterly value growth had reached 8.9 percent.

But that’s been sliding recently, with data released by QV on Wednesday for August showing three-month growth at 3.3 percent, down from 4.3 percent in July. The national average value is now at $963,046.

“While prices were still going up as we headed into the latest lockdown, the growth was at a significantly reduced rate compared to earlier peaks,” QV general manager David Nagel says.

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“This is the fourth month running that we’ve seen a reduction in the nation’s rolling three-month average growth rate, so the market has clearly been cooling. Interestingly, value growth rates are very similar to the levels we saw in the middle of 2020 when New Zealand came out of our first lockdown.”

However, that doesn’t mean we will see a similar sustained rise in price growth after the current lockdown, with Nagel saying it will be different this time around.

The growth after last year’s lockdown has been put down to pent-up demand, a large number of Kiwis escaping COVID-19 chaos overseas and returning to New Zealand putting pressure on supply, the Reserve Bank’s removal of loan-to-value ratios (LVRs), and very low interest rates.

Nagel says one difference now is that the economy “is doing fine without the stimulus that was needed in 2020”.

“Interest rates have nowhere to go but up, which was already signalled prior to lockdown, plus the rate of new builds is at an all-time high,” he said. “But most importantly, house price inflation coupled with reducing credit availability has taken home ownership out of the reach of many New Zealanders.