Economists are struggling to explain the biggest rise in house prices since early 2017.
New data from the Real Estate Institute of New Zealand (REINZ) for the month of August shows the first annual double-digit prince inflation nationwide since March 2017, despite the nationwide lockdown earlier this year and Auckland's return to level 3 early in the month.
"Like it never happened," said Kiwibank senior economist Jeremy Couchman.
"Buyers and sellers adapted to life under level 3, using digital channels to keep sales ticking over. But a housing shortage, record-low mortgage rates, and the absence of loan-to-value ratio (LVR) restrictions have hardened market resistance to COVID across much of NZ... Who said recessions were bad for house prices?"
Median prices hit a new nationwide high of $675,000, up a massive 16.4 percent on August 2019.
Auckland prices rose 16 percent to a median $950,000, up 3 percent since July. Excluding Auckland, the new median price is $570,000 - also a record.
"For the last few weeks we've been hearing reports from around the country of vendors achieving good prices for the sale of their homes, but we would never have guessed that eight regions and 17 districts/cities across the country would see record median prices just four months after the entire country was in lockdown," said REINZ chief executive Bindi Norwell.
"The housing market’s recovery post-lockdown over the last few months has been astonishing and has certainly surpassed many predictions."
Like Couchman, she credited low interest rates and the removal of LVR restrictions, as well as people wanting bigger houses in case there's another lockdown. Fewer listings than usual also pushed prices up.
Earlier this year, many economists picked a 10 percent drop in house prices thanks to the pandemic, with houses in some regions - like tourism-dependent Queenstown - possibly dropping 30 percent of their value.
It was the busiest August for sellers in five years, despite the low number of listings - up 25 percent from last year. Auckland also set a five-year high, the level 3 lockdown having no impact on business.
"The adoption of digital tools has been a key factor in keeping the property market moving," said Norwell.
Record prices were set in eight regions - Auckland, Northland, Waikato, Manawatu/Whanganui, Taranaki, Canterbury, Otago and Southland. Southland led the way with a 20.3 percent rise in the median price, from $310,000 to $373,000.
Cheap homes - below $500,000 - were rare, falling from 37.7 percent of the market in August 2019 to just 26 percent this year. Properties costing more than $1 million last year made up 13.4 percent of the market - this year, 20.7 percent.
"Just months ago, few would've expected such positivity in and around property prices going into spring," said Derryn Mayne, owner of Century 21 New Zealand. She credited the delay to the election date, from September 19 to October 17, as well as the wage subsidy extension and mortgage holiday scheme.
"The property market's key fundamentals remain in great shape, with mortgage rates never lower and prices in the regions doing extremely well despite what many pundits predicted."
Kiwibank warned though things appear rosier than ever for property owners, there are a "few straws in the wind".
"The surprising strength in the housing market suggests that an expected correction in the market won't be as severe as we had previously expected," said Couchman. "But demand is still expected to cool heading into the end of the year. The wage subsidy is waning, and net migration is virtually non-existent while our borders are closed."
