Dunedin went into the nationwide lockdown at the end of March hot. It was New Zealand’s best-performing metro housing market, recording double-digit value growth while other cities were either on the slide or making do with rises of five or ten percent.

Eighteen months ago, Dunedin’s median property value was $417,000 – up 51 percent on the same period five years before. Just before Covid-19 hit in March of this year, the median was pushing its way past the half a million dollar mark.

But OneRoof new house price index developed by its data partner Valocity shows that Covid-19 put the brakes on Dunedin’s growth, with property values in the city slipping 2.5 percent since March 25.

While the drop on the index isn’t the biggest – that title belongs to Queenstown, which has seen values fall 7.7 percent – it is perhaps the most surprising.

Dunedin was the star of the New Zealand housing market – so why is it now at the bottom of the class?

Valocity director of valuation James Wilson says Dunedin’s growth was heavily driven by investors and those trying to make the most of the short-term capital growth.

“We’ve seen that come to a grinding halt, with investors deciding post lockdown to wait on the sidelines. First home buyers have not stepped in to fill the gap as much as they have in other locations, such as Auckland, so values in the city have softened,” Wilson says.

It’s too early to tell how long Dunedin’s housing market will remain soft, he says.

“There’s a hype in the market but it’s just not generating the same rate of growth as it did pre-Covid because no one is bumping the price up.”

Lack of stock is also a problem in Dunedin.

Donald Muldrew, sales manager at Cutlers, told OneRoof last month that the whole city was struggling for listings. “We have more than 230 agents in Dunedin, and only 251 listings. That is incredibly low - we should have double that. There are not enough listings to keep us going," he said.

He said homeowners were holding back on selling because they couldn't see anything else on the market to buy.

Joe Nidd, owner of Nidd Realty, said it would be a few months before the market got a clearer picture of what was happening Dunedin.

“It is hard to unpack the data and workout what was going on. We had a period of huge amount of stock coming in a short period of time and then we had an unusual situation when buyers were struggling to get finances but they had a lot of choice.”

Nidd said winter in Dunedin was traditionally a slow time for the market but saying that “we’re feeling very similar market-wise where we were in February, which is very unusual for this time of the year but buyers and sellers are showing a lot of confidence”.

He had seen a lift in enquiries from ex-parts, particularly from Australia and the United States.

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