Property market surpasses expectations – but will it last?

New Zealand’s property market continues to hold up despite all the uncertainty, surpassing expectations, and prompting economists to revise their forecast once again. While a downturn is still expected, most experts agree that the drop shouldn’t be “massive”….

Some relevant factors to watch

According to independent economist Tony Alexander, there are several contrasting forces driving long and short-term dynamics, including:

• Strong demand from first-home buyers and investors hunting for bargains and looking to cash in on record-low interest rates.
• Weak housing supply, due to vendors cautious approach.
• Tight lending criteria making it difficult to access finance.

Amongst the major factors to consider remain rising unemployment, next-to-zero immigration, and the end of wage subsidies, all of which could have a negative impact on prices. On the upside, mortgage rates continue to be at historical lows and are unlikely to increase anytime soon.

Could returning Kiwis hold the ‘key’ to steady house prices? It’s the hypothesis advanced by QV general manager, David Nagel: “There’s a lot of people that have to find somewhere to live and makes up significantly for what will be a significant reduction in normal migration numbers. Certainly, they’re filling the void at the moment.”

How will the rest of 2020 pan out?

In a recent article, CoreLogic’s senior property economist Kelvin Davidson pointed out that, despite reassuring results over the past few months, “the good times that have re-emerged for property since April are more likely to fade out in the second half of the year than to roll on.”

Davidson said that Spring could be a ‘litmus test’ for the market: “As we hit Spring we’ll see the usual seasonal rise for listings, which will be a test for the true strength of demand – if it falters, then available supply on the market will rise steadily, and reduce the support for prices.”

Overall, there seems to be a silver lining for the ‘land of the long white cloud’. “It won’t be as bad as some of the property downturns that we’ve seen in the past,” said Davidson. “And then over the long term, the appeal of the property will remain – so with many of the fundamental drivers likely to return to normality, upwards pressure on prices will start to return.”

Have a mortgage-related question to ask?

The situation is a work in progress, and we’ll continue to monitor it closely – please don’t hesitate to contact us should you have any questions at all.

In the meantime, if you’re pondering your next property move, click here to check out the latest data from the Real Estate Institute of New Zealand (REINZ). It’s a handy source of information about median property prices, listing numbers and days-to-sell periods.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.