Kiwis' confidence that low interest rates won't be jumping anytime soon is one of the big contributors to New Zealand's current sky-high housing prices and sales, a property commentator says.
The Real Estate Insitute of New Zealand (REINZ) revealed on Tuesday that the number of residential properties sold nationally in September increased 37.1 percent on the same time last year, with the highest number of properties sold in one month since March 2017.
There's also a new record high median house price of $685,000, up 14.7 percent from $596,956 in September last year and up $10,000 since August.
That jump wasn't expected by commentators several months ago. Instead, some suggested the COVID-19 pandemic and resulting economic fallout - including thousands of people losing their jobs - would lead to negative or slow growth.
Speaking to The AM Show on Wednesday, property commentator Ashley Church said "it's a strange ole time".
"If you go back three or four months commentators were talking pretty collectively about prices going down and the banks were talking drops of anything between 5 and 15 percent. Here we are in probably the strongest market we have had in several years. It is a very, very weird environment," Church said.
"When you look at why that has happened, there is a couple of possible contributors. There are things like the large number of Kiwis returning back to New Zealand that is putting demand back on the housing stock."
But Church believes record low mortgage rates are the main thing driving the growth. Many banks are offering tiny rates, with Heartland Bank announcing this month New Zealand's first sub-2 percent mortgage rate.
"For me, the major contributor to this is the cost of money, those cheap mortgage interest rates and probably, most importantly, the fact that people have got confidence around the fact that not only are those rates low but they are going to stay low for a long time and potentially even go lower," Church told The AM Show.
"The cost of money has been coming down over the last 40 years but we have this really weird COVID environment where, because of COVID, the Reserve Bank has done things it wouldn't normally have done at this stage of the property cycle.
"As a result of that, we probably would have had an increase in Auckland prices starting toward the end of next year and that boom would have started to take off again. I think that has come early. I think that's about a year early"
Bindi Norwell, REINZ's chief executive, agrees.
"Much of this activity is being driven by the extremely low rates at which people can borrow money, which is at its lowest levels since records began, consumers having additional 'cash' available due to a lack of international travel and some uplift from returning ex-pats," she said on Tuesday.
"When you then add in high levels of confidence in the housing market, the removal of the LVRs back in March and people’s fear that prices are just going to keep increasing in the future, then this explains why people are going to such lengths to secure a property now."
Norwell said there is no sign of change on the horizon. However, she believes it will be interesting to look at October's sales to see if the impending election causes Kiwis to hold off buying.
It's also not just Auckland powering the increase. If you take Auckland out of the equation, the number of properties sold in September across the country jumped 29.9 percent compared to last year.
Among the regions seeing large increases is Nelson (up 66.2 percent), West Coast (up 57.9 percent), and Tasman (up 42.5 percent). REINZ says no region saw an annual decrease in sale volumes, but Gisborne's volumes remained the same as last September.
Nine regions saw record-high median prices during September.
Church said the regions should be coming "off the boil" and that housing prices there should have been going flat for four to five years. But every indication is that that is not going to happen now, he said.
"It is the same thing and the prices [in the regions] are going up. But the difference between Auckland and the difference and the rest of the country... is that in Auckland it is simply bringing forward what would have happened anyway."
