In one of the most important months in New Zealand’s economic history, May 2020 has seen a determined directive where fiscal policy and spend is aimed firmly at the health and wellbeing of New Zealand’s team of five million.

In just four short weeks Kiwis have transitioned to alert level two; digested major financial announcements by the Government in its ‘Rebuilding Together’ Budget and listened as the Reserve Bank of New Zealand (RBNZ) expanded its quantitative easing programme in the latest Monetary Policy Statement (MPS).

Revealing the biggest programme of spending in New Zealand’s history, the Budget 2020 focussed on jobs, job creation, and business support.

Where rent subsidy funding will help landlords, a substantial education scheme for trades-based apprenticeships and additional infrastructure spend are aimed at tempering the effects of unemployment.

However, it’s the massive relief spend through initiatives such as the wage subsidy extension that will filter its way back to the property market in the form of continued activity, the experts say.

Similarly, by doubling its Large Scale Asset Purchase (LSAP) programme potential to $60 billion, the RBNZ is purchasing more government debt in the form of NZ Government Bonds, local government debt and NZ Government Inflation-Indexed Bonds to inject money into the economy while lowering borrowing costs to households and businesses.

This has the potential to provide stability to property prices as the LSAP programme cushions the jarring effects of the recession, encouraging investment into tangible assets which include residential property.

Noting that New Zealand’s banking systems are not yet ready to initiate a negative OCR, the RBNZ instead looked to the LSAP programme as the most effective way to deliver further stimulus.

Despite keeping the OCR on hold at 0.25 percent, the latest MPS announcements have huge ramifications for the property sector – one of which was the message to banks to get their systems ready for a negative OCR by year-end. This has contributed to intense competition across the residential-lending sector, providing an impetus for those on the fence to make their move.

In an unexpected turn, building and construction minister Jenny Salesa recently announced an easing of consent requirements for small home improvements.

Despite no distinct correlation to residential property sales at this time, the news keeps property at the forefront of the Kiwi psyche – as more homeowners look to add value through do-it-yourself projects, giving rise to a potential wave of listing activity as purchasers invest, upgrade and move on to their next new home.

While New Zealand’s economic focus remains solely on support, the residential housing sector has shifted nicely back into gear, encouraged by a combination of record-low interest rates, Government support and persistent demand from movers, families and expatriate Kiwis returning home.

In-depth reports:

• In its Weekly Economic Bulletin, Westpac chief economist Dominick Stephens explains why he expects the RBNZ will slash the OCR into negative territory by April next year.

• In its latest Housing Market Update, CoreLogic New Zealand’s head of research Nick Goodall finds that while competitive mortgage rates indicate banks are back in business, the fork in the road for residential property will come in September. When amid the general election, the Government’s financial relief initiatives – such as the six-month mortgage holiday are expected to come to an end.

• Despite a volume decrease of 78 percent when compared to this time last year, the latest residential sales data from the Real Estate Institute of New Zealand (REINZ) shows that property values have held stable with 14 out of New Zealand’s 16 regions reporting median value increases.

Topical articles:

• Property website realestate.co.nz finds that during lockdown visitors spent an average of 28 percent more time browsing listings, while 23 percent of all website traffic during May came from outside New Zealand. Key markets include Australia, America, and the United Kingdom.

• Despite a degree of pain felt by the residential property sector at the hands of the current recession, the Budget 2020 included continued financial relief for homeowners, businesses, and renters which the experts say will find its way back to the residential property market.

• [Incongruence between messaging from the RBNZ and banks’ willingness to lend](http://tonyalexander.nz/resources/Tony's%20View%20Valuers%20Survey%20May%202020.pdf 'http://tonyalexander.nz/resources/Tony's View Valuers Survey May 2020.pdf') is having an impact on the property sector, survey responses in independent economist Tony Alexander’s recent newsletter indicates.

• With an acute shortage of rental properties and social housing, the New Zealand Property Investors Federation (NZPIF) says proposed changes to the Residential Tenancies Act would further exacerbate a difficult situation. Here it outlines some of the potential unintended effects.

• Anecdotal evidence supports the notion that the world and its potential property purchasers are looking to New Zealand as a safe haven amongst growing economic upheaval and safety concerns.