An economy in recovery

Now with vaccinations on the global horizon, Bayleys asks its panel of property experts how they expect the first year of this new decade to play out?

Entering the new decade with a balanced focus on economic recovery, Bayleys’ panel of property experts weigh in on expectations for the new year.

Bidding farewell to 2020 – the year that delivered a once-in-a-century economic shock, 2021 has kicked off with early market indicators pointing to continued growth and positive performance of New Zealand’s residential property market.

Where record-low interest rates and rising business confidence have been the major benefactors of the Government’s COVID relief packages and substantial fiscal policy from the Reserve Bank of New Zealand (RBNZ), a strong appetite for tangible assets persists.

Now with vaccinations on the global horizon, Bayleys asks its panel of property experts how they expect the first year of this new decade to play out?

Bindi Norwell
Chief Executive Officer, Real Estate Institute New Zealand

“After reaching record highs in many parts of the country last year, median property values continue on an upward trajectory.”

“Market activity is underpinned by low interest and mortgage rates as well as the diversion of spend on international travel and a shortage of listings resulting in increased competition for properties of all types.”

“We’re seeing a greater number of Kiwis look to apartments, townhouses and units as a more affordable alternative to standalone housing illustrated by data showing some 40 percent of all building consents issued since mid-2019 has been for multi-unit developments.”

“This growing trend makes the anticipated review of both the Unit Titles Act and the Resource Management Acts all the more important, and we are looking to 2021 as a year that will see policy focussed on supporting the construction of more houses built at speed and scale.”

“The reintroduction of loan-to-value ratios (LVRs) early in 2021 has the potential to feed heightened activity, while proposals of a Bright Line Test extension could equally make an impact. However, the key market drivers of low supply, high demand and record-low interest rates are expected to persist and New Zealand’s residential property market is in good shape to continue in a similar fashion in 2021.

Tony Alexander
Independent economist, speaker and writer

“Economic indicators paint a picture of continued housing market performance in the short-to-medium term and I expect 2021 will continue in much the way 2020 ended – with a busy residential market place.”

“Low interest rates, expectations of migration booming again one day, and a revelation of a huge degree of pent-up demand will dominate restraining factors and I expect to see property prices keep rising – albeit at a slower pace than the last five months.”

“Where there’s been much ado about a negative Official Cash Rate (OCR), risks to the economy no longer favour its use and as New Zealand’s economy strengthens the expectation exists that wholesale interest rates will begin a slow upward creep.”

“Interest rates are providing the single most powerful stimulus to the housing market and it remains reasonable to expect that our OCR will remain at the record-low level of 0.25 percent until early 2023.”

“However, a quicker than expected economic recovery and the huge impact of fiscal policy on asset prices indicates to me that the Reserve Bank of New Zealand (RBNZ) may well be forced to raise the OCR before then, most likely sometime in 2022.”

“It’s no secret that resilient Kiwis and the New Zealand economy have weathered the storm that is COVID-19 better than most, and we’ve seen renewed optimism about future growth continue to rise as vaccine trials prove successful and the expectation for our borders to open 12-or-so months from now gains traction.”

Cameron Bagrie
Independent economist and director of Bagrie Economics

“The biggest shot in the economic arm we’ve ever seen through expansive fiscal policy and monetary policy measures have enabled more New Zealanders to stay employed, keeping the economy supported, and asset prices boosted through a difficult period.”

“If people feel wealthy, they will spend money and that’s a phenomenon we’ve seen across the residential property market, however, discontent in society and affordability constraints are on the radar as we’re arguably witnessing too much of a good thing.”

“Policy-makers are having a tough time balancing social and economic objectives.”

“Asset prices are just one channel monetary works through, and while lower interest rates make housing more affordable, presenting a more viable alternative to renting, rising house prices also make it more difficult to save for a deposit.”

“The ratio of house prices-to-income keep rising and Kiwis are needing to take on lots more debt to get into a home, creating further growing pains for first home buyers.”

“So long as the housing market is burning hot, calls for the likes of a wealth tax will intensify and I expect to see a greater emphasis on finding balance from policy-makers throughout the second half of this year.”

“That means speculation of tax changes, but the key to restraining house price growth to more moderate rates is increasing housing supply.”

“The policy response to COVID-19 has been correct and it has protected our economy at the right time. Without that response, Kiwis would have experienced more extreme hardship, otherwise resulting in greater social problems.”

“The hook is that New Zealand has borrowed a lot of money and the Crown balance sheet shows it, but debt is tomorrow’s problem, and 2021 will continue to be about getting the economy back on track and more people into employment.”

Nick Goodall
Head of Research CoreLogic New Zealand

“Results from our House Price Index showed New Zealand’s residential property market finished 2020 on a high, with strength and resilience evident from every data angle across main and provincial centres.”

“It seems regions like Queenstown, one of those hit hardest by COVID-19, have reached their troughs and are emerging in 2021 following the upward current.”

“With housing inflation experiencing a sustained upswing, there has been much discussion about affordability and the perceived wealth of asset owners as aided by the Reserve Bank’s macroprudential toolkit.”

“Data has shown homeowners, on average, are finding it easier to service their loans, while those not in a home are taking about nine years on average to save for a deposit.”

“Owing to the fundamental mismatch here, I expect addressing affordability metrics will continue to be a key issue for policy-makers in 2021.”

“Discussion on the implementation of debt-to-income ratios has increased with property values however we’re not convinced these would, if utilised, make a significant change to the lending landscape with financial institutions already adopting a naturally cautious approach in this realm.”

“Building more houses would certainly ease supply pressures, however, rising construction costs and supply-chain disruption continue to reduce the incentive to build and it is becoming more evident that a combination of initiatives are required to address affordability constraints.”

“While strong economic results including rising business sentiment, better-than-expected employment figures and healthy building consent issuance offer less cause for concern around headwinds, it is pleasing to note that New Zealand’s economy continues to fare better than many of our global counterparts and we’re looking forward to sustained growth through this year of recovery.”

Vanessa Taylor
Spokesperson and general manager of marketing and media,

“Low stock numbers continued to drive house price growth across the country, from Auckland to the Manawatu and down to Southland at the close of 2020, and I expect to see a more positive performance from our regional sales markets in this new year.”

“The retention of otherwise expatriate Kiwis continues to support regional sales markets as young New Zealanders forgo their overseas experience in favour of nesting in their home towns.”

“Demand continues to outstrip supply with a significant rise in the number of visitors to our website providing an excellent indication of the strong appetite that persists for residential property.”

“Kiwis are still out there searching for their next home, as are foreign buyers and this signals that we will likely see prices push upwards in the medium-term.”

“A fundamental mismatch between supply and demand appears to restrain market activity in many of New Zealand’s regions with the resulting effect being increased competition and strong house price growth which has been encouraged by low mortgage rates and a lack of international travel.”

“While the world works ardently on approving and rolling out COVID vaccinations, our borders are expected to remain closed and the stimulatory dynamics that lifted the residential market to new heights last year remain in play – something I expect will continue into the first and second quarter of 2021.”


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