As Covid-19 shockwaves continue to ripple through the global and local property markets, it is easy for individuals to panic and fear for the worst. The property market has hit a wall of uncertainty as the sector enters in an entirely different world amid the COVID-19 pandemic.
Due to complete lockdowns, everyone is in isolation, and it has postponed many significant life decisions. At this time, property buyers face the most ambiguous environment they have ever confronted.
Undertaking one of the most significant financial commitments of one’s life is something which most of the individuals will correctly view as uncertain in the upcoming months. Therefore, even loyal buyers fixated on the long-term housing requirements and interests are likely to move away from the market.
The dwindling demand amid COVID-19 is expected to have two effects:
- One impact is directly on revenue, which will remain negligible in the next couple of weeks due to the lockdown and is likely to be shaky for the rest of 2020. The property workers will not be on the job, and there will not be any assessments of property or any auctions conducted. Like the other sectors in the NZ economy, the property market is expected to remain subdued with limited activity in the market for the rest of the year.
- Another impact would be on the prices of properties and how they shape in the coming few months. One would anticipate that the drop in demand to have a significant impact on the prices. However, as everyone is aware, the prices are determined by swings in both directions demand as well as supply.
In the backdrop, let us discuss five crucial questions related to the property market of New Zealand:
Question 1. What is the state of the property market in New Zealand?
Some economists have warned that prices of property are about to witness a sharp correction. COVID-19 has put the property market of New Zealand on thin ice. Despite the skyrocketing prices, agreement on the significance of homeownership continues to bring together the nation. The essential supply and demand explain part of the house price rise.
Few agents are anticipating a frightening period as both sellers and buyers continue in lockdown and expect that the impact will remain throughout 2020. There is likely to be a shortage of houses up for sale. Moreover, with limited transactions expected after the pandemic ends, buyers and sellers could expect a market filled with insecurity at least all through to the end of 2020 as the economy recovers.
Question 2. How will kiwis know that the property market is back on its feet?
The COVID-19 induced lockdown has resulted in more Kiwis eyeing at property listing. But as currently most of the things are dependent on the coronavirus pandemic, how the property market responds to an impending recession is surrounded by an air of uncertainty.
The prices of the property would be determined by how badly the economy has been impacted. What happens to the businesses have gone bankrupt will play a crucial role. In the post-coronavirus world, merchants would be more flexible when they are forced to sell, and that would directly reflect in the cost.
According to some economist, there would not be any increase in the sales of the housing market. At present, it is unclear as to when the market picks up as there might be several factors that come into play.
Question 3. Will Property selling go up?
There will undoubtedly be some individuals who would be eager to sell their respective properties once the situation improves to cover for their losses in their business or if they have lost their job and need cash. Also, people who used to rent out their properties for foreign tourists will face a significant challenge as tourism is unlikely to pick up pace anytime soon.
Some young buyers who recklessly had their KiwiSaver funds in an assertive growth fund as compared to those who remain in a moderate fund witnessed their potential house deposit fall away. They will have to postpone buying for possibly one more year.
Rental returns for investors, and hence their demand, will be limited by new legislation enacting a freeze in rent and prolonging the no-cause termination period.
Question 4. What cities and towns should Kiwis be taking notice of?
While the global financial crisis (GFC) is by no means a directly comparable event, the first thing that was observed is a reverse concentric rings theory. As per the reverse concentric ring’s theory the centre of the city will have the maximum number of customers, so it is advantageous for retail activities. For Auckland, the middle is the central business district (CBD) and those higher-level suburbs that fringe the CBD tend to grow in value quickly to start with.
Question 5. If anyone needs to sell property what to keep in mind?
If people are left with no choice but to sell their property, they should take time to understand what is happening in the local property market. The property sellers could discuss with valuers and agents who know the area very well. Local experts would be able to explain the current trends local market, and they can describe the actual demand or property. One should take time and do thorough research before they decide to sell their house to make most from their sale.
The NZ property market is in a tricky position and affects all the stakeholders involved, whether they own a property. The conflicting interests where some want a reduction in demand through taxes and others want support in terms of regulatory easing to boost supply further complicate the scenario. While there could be a trade-off for any policy intervention, it is highly likely that the property market will discover its new normal.