Quotable Value has warned that house prices are teetering on a cliff edge and it's no longer a question of if they will fall but how far they will fall.
In its report on the market for May, QV said prices were showing the first signs of fragility as the easing of lockdown rules allowed the market to start returning to normal.
It warned of a gap developing between the prices vendors were expecting to receive and the price buyers were prepared to pay.
"A disconnect in expectations is developing between vendors and purchasers amidst declining sales volumes, suggesting we are on the brink of material declines for the first time in nearly 12 years," the report said.
"The market is teetering on a cliff's edge as we enter winter, the question now is how far will it fall."
The warning appears to contradict the data in QV's House Price Index for the three months to the end of May, which showed the average value of homes throughout the country was $739,539, up slightly from $735,979 in the three months to April.
Average values in the three months to May were also up compared to the three months to April in Auckland, Wellington, Christchurch and Dunedin, suggesting values generally were continuing to rise.
However, QV's report says the Index doesn't yet illustrate the dramatic impact COVID-19 was having on sales volumes.
"The key point we can note from the QV House Price [Index] data this month is the gradual decline in quarterly growth in May, with 14 of the 16 major cities we monitor showing a reduction in the rate of growth since April," QV General Manager David Nagel said.
"This trend is likely to continue as a greater proportion of post-lockdown sales are used in the HPI calculations.
"The data shows the property market was continuing to perform strongly throughout early to mid-March, indicating strength right across the country.
"However, with sales volumes for April and May being down significantly on normal April and May activity, the data is skewed towards earlier stages of the three month period when volumes were much higher.
"When we look at just the April and May transactions in isolation, it shows a definite impact, with post-lockdown sales on average down by around 5% on pre-lockdown levels," he said.
Nagel said it would likely take several months before the full effects of the COVID-19 pandemic would be felt by the real estate market.
"While the data is still sketchy, we're now very confident that the market has come back already from value levels we saw in February and March, particularly in some of the high risk locations that had previously experienced a sustained period of value growth," he said.
"What we don't know yet is the quantum of correction that the market can expect to see as the economy transitions post-pandemic.
"Over the coming months we'll likely see more listings gradually coming on stream after the cushioning effect of the Government wage subsidy comes to an end and bank mortgage holiday periods expire.
"Unfortunately this will be when the full impact of the pandemic will be reflected on real estate values," Nagel warned.
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|QV House Price Index May 2020|
|Territorial authority||Average current value||12 month change%||3 month change %|
|Main Urban Areas||847,497||7.2%||2.4%|
|Auckland - Rodney||984,069||2.5%||2.1%|
|Rodney - Hibiscus Coast||962,786||2.7%||2.2%|
|Rodney - North||1,005,310||2.3%||2.0%|
|Auckland - North Shore||1,257,549||6.6%||3.6%|
|North Shore - Coastal||1,433,058||6.0%||3.8%|
|North Shore - North Harbour||1,213,823||5.9%||1.9%|
|North Shore - Onewa||1,025,011||8.6%||4.9%|
|Auckland - Waitakere||857,957||5.5%||3.0%|
|Auckland - City||1,285,679||6.2%||2.6%|
|Auckland City - Central||1,120,273||6.2%||2.2%|
|Auckland City - Islands||1,139,027||2.6%||-3.5%|
|Auckland City - South||1,150,720||7.2%||2.7%|
|Auckland_City - East||1,621,782||5.6%||3.4%|
|Auckland - Manukau||937,860||5.1%||2.7%|
|Manukau - Central||722,671||4.6%||3.1%|
|Manukau - East||1,198,734||5.6%||1.9%|
|Manukau - North West||819,547||4.9%||3.2%|
|Auckland - Papakura||723,750||2.3%||1.0%|
|Auckland - Franklin||688,500||2.2%||0.9%|
|Hamilton - Central & North West||590,005||9.3%||1.3%|
|Hamilton - North East||774,291||6.0%||1.4%|
|Hamilton - South East||585,008||8.3%||1.1%|
|Hamilton - South West||557,493||7.1%||0.1%|
|Central Hawkes Bay||405,052||7.2%||-1.0%|
|Wellington - Central & South||886,705||8.3%||0.2%|
|Wellington - East||964,454||7.9%||2.0%|
|Wellington - North||817,550||7.6%||0.4%|
|Wellington - West||1,016,824||8.7%||0.5%|
|Christchurch - Banks Peninsula||547,999||5.0%||-0.1%|
|Christchurch - Central & North||605,070||3.0%||1.4%|
|Christchurch - East||394,006||4.4%||1.4%|
|Christchurch - Hills||701,439||2.8%||-1.3%|
|Christchurch - Southwest||491,701||4.0%||0.9%|
|Dunedin - Central & North||562,304||18.6%||3.1%|
|Dunedin - Peninsular & Coastal||492,355||20.4%||-0.3%|
|Dunedin - South||539,072||23.4%||5.8%|
|Dunedin - Taieri||577,302||21.7%||5.4%|
|Main Urban Areas||847,497||7.2%||2.4%|