What’s happening in the housing market? Let’s start with the bad news:
- Rental vacancies are up on the pre-lockdown levels (although they’re now dropping again)
- Rents are flat to falling
- International students are unlikely to be coming back into New Zealand until 2022, which suppresses accommodation demand
- Overseas tourism isn’t going to improve anytime soon
- Immigration is likely to be neutral (which apparently isn’t stopping people from trying to move here)
- The global economic outlook is… pretty dismal.
Then there are the positives:
- New Zealand’s property market is holding up incredibly well right now. There were many predictions of house prices falling by between 8% and 15%; so far that hasn’t happened. It still could happen, of course.
- Some Kiwis are feeling flush right now, having plenty of money saved after lockdown and not able to travel overseas.
- Interest rates are as low as 2.45%, making borrowing an attractive option and preventing too many forced sales.
- The government has put billions into the economy, including printing money (quantitative easing) which traditionally pushes up asset prices.
Other underlying factors are also supporting house values, particularly the fact that we never fixed the Auckland housing undersupply that was so severe coming out of the GFC. With developments likely to be lower this year due to lockdown, we may find the undersupply is as bad as ever, which pushes up prices due to scarcity. The low levels of listings we’re seeing right now points to reluctant vendors and enthusiastic buyers.
Overall, the housing market feels surprisingly robust – especially considering where we thought it would be when we were stuck at home in March wondering how long the lockdown would last. Here at Impression, we’re feeling optimistic. Only time will tell if we’re kidding ourselves!