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House prices holding up during COVID-19 pandemic

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The property market is holding its own in the face of the COVID-19 pandemic, with rural and provincial areas faring better than the main cities.

CoreLogic's house price index eased 0.2 per cent in the three months ended August, with rural and provincial areas faring better than most of the big cities.

The organisation's head of research Nick Goodall says property values have been hit by lockdowns, with tourist centres in particular hardest hit.

But he says a wide range of economic and financial support measures such as wage subsidies, mortgage deferrals, government relief programmes and the Reserve Bank's move to keep a lid on interest rates have helped to underpin the market.

"As long as significant support... remains, the chances of a significant correction in values are greatly reduced."

The biggest fall was in Queenstown, down 7.4 per cent, while Auckland and Dunedin each fell more than 1 per cent. Most provincial centres were steady, but prices in rural areas were up more than 1 per cent.

Nick says tourist regions, especially those reliant on foreign visitors, could be expected to see prices remain soft but other areas with more diverse economies, and cheaper prices might see price gains.

He says one fundamental of the local property market remains the supply-demand balance, with the supply of houses never meeting demand.

"Property demand remains strong, further entrenching our view that widespread value drops are unlikely to occur as we move into the typically buoyant spring season," says Nick.

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