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Housing market: 6 factors to consider

It looks as though New Zealand is headed towards an unexpected recession. While house prices are expected to drop in the near term, economist Tony Alexander points out six factors to think about in the current market.

Friday, March 20th 2020, 9:31AM

In his latest report on the coronavirus, Alexander says he does not believe the housing market will lead to a long period of major price drops. 

"Is it likely that the weakness in our economy set to roll through over the next six months or so will cause widespread house declines? Will all those people who incorrectly predicted a big price crash in 2008, 2009, 2010 and 2011 finally get a forecast right? Probably not."

He adds: "Our housing markets around New Zealand will certainly be weaker than they otherwise would have been for a variety of reasons. Higher unemployment will have an impact. But in the absence of high interest rates the main thing that will happen is sharply reduced sales as we put big financial decisions on hold."

Alexander lays out six key factors to consider as the housing market heads into a downturn.

The housing market is not as volatile as the stock market 

"No-one has just learned that the value of their house or investment property has dropped 25% from January. Share prices can be highly volatile but house prices change only slowly," he says.

We have record low interest rates

"This means not just lower mortgage rates improving the ability to finance a property, but an incentive to invest generated by further declines in term deposit rates."

NZ's housing shortage

"Property shortages are present in our main centres and these shortages will help underpin prices. They are not a new source of upward pressure."

Few listings to pick from

"Listings are in short supply all around the country and anecdotal feedback from the United States is that some vendors are withdrawing their properties from the market because they don’t want strangers entering the homes they still live in."

Corona's effect on migration

"One might think that the turmoil offshore will improve our net migration numbers as Kiwis stay home and some come back. But some migrants on work visas who lose their jobs – and there will be many of them in the travel and hospitality sectors – will be leaving."

Government stimulus

"This will provide a substantial offset to economic weakness from other areas and has been made possible by excellent fiscal management by both main parties (apart from Labour in 2008) since the 1990s."

Tags: Covid-19 house prices housing market Tony Alexander

« Kiwibank cuts one year fixed rateBNZ enters price war with 3.05% fixed mortgage »

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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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