The second quarter of 2020 saw a record-breaking 12.2% drop in New Zealand’s GDP, which was not as severe as had earlier been predicted.
In May, Treasury forecast a drop of 23%, and even a week earlier it was forecasting a 16% drop. While a plummeting GDP is never good news, it certainly could have been much worse. The next quarter is likely to bring an enormous jump in GDP, although it will be a long time before we regain the momentum of the first few months of the year.
But Kiwis continue to throw money into shares and the housing market, with both performing extremely well. Post-lockdown house price recovery has been “astonishing”, Bindi Norwell, CEO of REINZ, told RNZ, “…we would never have guessed that eight regions and 17 districts and cities across the country would see record median prices just four months after the entire country was in lockdown.”
The housing market is being supported by incredibly low-interest rates – right now you can get a home loan for as low as 2.45%. That’s pretty unbelievable; you can borrow $1 million and it will cost you just a nudge under $4,000 a month on a 30-year term.
Usually, right before an election, we see buyers get nervous and put purchases on hold. Will that happen this year? Currently, it looks doubtful, but we’ll just have to wait and see.