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Could the coronavirus hit the housing market?

The coronavirus outbreak in China could impact tourism and economic growth in New Zealand, having a knock-on effect on the official cash rate, according to one economist.

Thursday, January 30th 2020, 4:17PM 1 Comment

Independent economist Tony Alexander believes the pace of economic growth could be slowed by the virus, amid declining tourist numbers entering New Zealand. 

The reduction in tourism will "reduce the ability of businesses to raise prices", leading to reduced inflation. Subsequently, there could be "less chance of higher interest rates this year and the return of a possibility that rates get cut," Alexander said.

The economist added: "The negative economic impact to come from the new virus outbreak increases the chances that there will be another easing of monetary policy this year. A cut in the cash rate at the next review on February 12 is extremely unlikely, and while the Reserve Bank will note the downside risks, they will probably be quite reluctant to signal a new bias toward lowering rates – given what is happening in the housing market.

"The main impact of the virus outbreak is likely to be some declines in medium to long-term bank borrowing costs. This week such declines only amounted to around 0.05% so as yet market impact is minor. We wait and see."

Alexander, keynote speaker at last year's TMM Better Business Conference, believes the coronavirus, if it continues to spread, could hit regional housing markets reliant on tourism.

He added: "All up, at the very margin, a virus outbreak looks like a net negative for housing markets in tourism-focused locations like Rotorua and to a lesser extent Queenstown and Wanaka.

"But elsewhere in the country the interest rates effect and potentially tiny net migration effect could be a small net positive – unless the outbreak develops into thousands of people dying offshore with no clear end in sight."

Tags: housing market OCR OCR forecasts Tony Alexander

« Mortgage lending strong in DecemberWill the Reserve Bank change course? »

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Comments from our readers

On 31 January 2020 at 1:29 pm Chatterbox said:
Watch insurers move to block claims. Banks insist on insured mortgages. End of market !

NZ Govt. allows returning foreign students to move back into University accomodation dwelling apartment towers. They will become hot house incubaters for Coronavirus. Then watch CBD clear out. Apartments will crash in value. End of that market ! Who do you blame? Not hard !

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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