Until the Coronavirus struck New Zealand in early March, the housing market was ticking along nicely, with the average national value going up 6.1% in the last 12 months, but coming out of lockdown we can expect to see a very different market, Quotable Value Ltd General Manager David Nagel anticipates
In the final week before lockdown, we could see the impacts of uncertainty starting to have an effect. Real estate agents & developers were rushing to get homes listed in anticipation of a change in the playing field. But purchasers were less bullish & less willing to commit as the market was heading into uncharted territory. Then everything changed on 25 March.
Up to this point we were seeing multiple buyers, often with plentiful funds available, competing for tightly held stock. Going forward, supply of houses for sale will likely be reduced. The pipeline for new builds has been impacted, as has almost every other industry during lockdown.
Most New Zealanders will look to consolidate their position in their current home as the country works its way out of a forecast recession. Selling an existing property and upgrading to a different home will likely be furthest from their mind, although some may be forced to downsize or even relocate to a new city in order to gain employment.
But banks will be patient, particularly in the short term, with a multitude of other, softer options available like mortgage holidays, to avoid a flood of forced sales.
Demand for buying a house will also likely be down significantly. First-homebuyers that were active prior to lockdown may have lost some buying power, with both their investment savings & Kiwisaver accounts taking a hit. Their house deposit & employment status may look quite different after lockdown ends, delaying their entry into the market.
Others that have fared better under lockdown may see this as an opportunity, while interest rates are low, to dominate what’s left of the market. With many first-homebuyers no longer competing, plus a likely post-lockdown slashing of net migration numbers no longer feeding housing demand, we could see a buyers’ market develop.
Multi-unit developments currently under construction will be completed after the lockdown ends, but contract settlements could be impacted by sunset clauses within some purchase contracts. That effectively puts a time limit on the contract’s validity, which could come into play depending on the length of the lockdown. Developers will take a cautious approach to new projects and will be revisiting the viability of each development based on new selling levels.
What’s most likely is we will see transaction volumes drop significantly from pre-lockdown levels. House listings will dry up, with only those having to sell, for work or financial reasons, wanting to enter an uncertain market.
Buyers that have the means will likely dominate the market, but with limited stock available buyers will probably exercise patience and this could force prices down for vendors that simply have to sell. But by how much? Nobody knows.
The market will take considerable time to settle to a new normal after the lockdown ends. There will be pre-lockdown transaction settlements that will occur, plus a very limited number of transactions that occurred during lockdown. But with limited transactions after lockdown ends, we can expect a market filled with uncertainty at least through to the end of 2020 as the economy finds its feet again.
Quotable Value Ltd.