As New Zealand continues to navigate the muddy economic waters of uncertainty arising from the COVID-19 pandemic, push/pull mechanisms at play continue to drive residential sale decisions – and they’re not all negative, say Bayleys national director of residential Johnny Sinclair and independent economist Tony Alexander.

“In the last month, we have seen the New Zealand Government significantly expand its economic support package to around 20 percent of Gross Domestic Product (GDP),” Johnny says.

“While the Reserve Bank of New Zealand (RBNZ) rescinded loan-to-value restrictions (LVR) and expanded its quantitative easing programme making it easier for Kiwis to borrow money, the economy including our residential housing market have the green light to operate again with relaxed restrictions under alert level two.”

Residential real estate

For those in the residential housing market, Johnny says there has been mixed emotion across the country with anecdotal evidence from salespeople revealing clear regional differences.

“Prior to COVID-19 our national housing market was experiencing a sustained period of value growth with stable prices and strong demand resulting in a chronic shortage of listings in many parts of the country.

“While travel restrictions and an economy dampened by the extended lockdown period have temporarily hampered residential sales activity, we’ve seen life return to the market, dictated by regional performance,” Johnny explains.

Locations, he says, with affordable housing and high investor interest such as some parts of Auckland and the Waikato are still garnering strong attention from buyers like those searching for their first home, which when contrast with the aforementioned listings shortage, continue to encourage price stability.

However, he says a more tentative market sentiment has emerged in those areas reliant on the tourist economy such as Rotorua and Queenstown.

Despite short bursts of market fluctuation, it’s important that those buying and selling residential property focus on the bigger picture, he says.

“The true extent of COVID-19s impact on our housing market will not be clear until sales data is available, however anecdotal evidence tells us that factors which motivate people to buy and sell, persist in spite of economic uncertainty,” Johnny says.

**Unemployment and spending **

While rising unemployment and the absence of income means the inability to save for a deposit, service a mortgage and perhaps maintain existing loan payments, independent economist Tony Alexander expects the road to recovery will appear much sooner than in previous downturns.

“The unique aspect of this recession is it’s a temporary, voluntary crushing of the economy undertaken in order to save the lives and long-term health and happiness of thousands of people,” Tony says.

“This recession does not result from a global financial shock in response to excessively bad lending and excess construction of houses in many countries, as was the case with the 2008 Global Financial Crisis (GFC).”

“Because the worst of this downturn is hitting now and in the next few months, and job losses are radically front-loaded, recovery will appear sooner and the willingness of people to spend, and businesses to hire is going to return earlier than in previous recessions - with assistance from the biggest set of fiscal and monetary stimuli that we have ever seen,” he adds.

Despite this, underlying unemployment persists and the impact on the inbound tourism and hospitality sectors as well as the ‘weeding out’ of underperforming businesses will be the biggest contributors to rising unemployment.

**Market sentiment **

Where the Government and the RBNZ have made massive moves to protect jobs and stimulate the economy, the absence of high debt growth, high interest rates and high exchange rates have given some pause for thought.

“We know the economy is in recession, but because we are missing some of the key drivers which stretched personal finances in previous downturns, there lingers an air of uncertainty which has the potential to translate to a ‘wait-and-see’ approach to spending,” Johnny says.

While low debt servicing costs and the Government’s mortgage holiday scheme have temporarily mitigated the pressure of forced sales, a number of properties may still come to market to relieve financial strain.

However, Tony says that factors such as; record-low interest rates; the removal of LVRs; a housing shortage; limited construction; future migration driven by a positive international reputation; support measures; and an estimated $10 billion not spent on overseas travel also have a significant bearing on the prosperity of the property market.

“Muted discretionary spending over the lockdown period could find its way to the property market as New Zealanders focus liquidity on bricks and mortar assets such as housing,” he says.

In spite of an uncertain economic future, Johnny says the overriding message is that opportunities exist for both buyers and sellers across the residential real estate sector.

“For the first time in many years, Kiwis are resisting the urge to fly the coup, we’re retaining a generation which may otherwise have taken off for their overseas experience (OE) never to return again.

“We’re also attracting a wave of expatriate Kiwis back home, along with strong positive attention overseas thanks to our relatively isolated island position and strong pandemic response.

“Encouragingly, the varying budgets of these buyers have the potential to offer stability across the spectrum of housing stock, from first-home style property to upper-tier aspirational homes,” Johnny says.