APIA Blog

RSS Feed

Kelvin Davidson: How has COVID affected the property market

Thursday, September 10, 2020

IMG SOURCE: UPSLASH

 

COVID-19 hasn’t significantly undermined the property market so far

In this fast-moving COVID environment it’s easy to lose track of everything that’s changed since the end of March and how the property market has been impacted.

Recall that since March:

  • The Government has launched a huge fiscal support package, including the wage subsidy, which has kept people in jobs and paying their mortgages;
  • The Reserve Bank has cut the official cash rate to 0.25% (and it could go negative in early 2021), delayed the new bank capital requirements rules, embarked on an asset purchase programme of $100bn, and temporarily removed the loan to value ratio speed limits;
  • The trading banks have shown considerable latitude with borrowers, including extensions to loan terms, switches to interest only payments, and full-scale mortgage payment deferrals

Back in the dark days of April, you’d be forgiven for fully expecting that all of this – rising unemployment and economic recession included – would cause property sales to collapse and house prices to fall. In reality, sales activity did slump in April, and it’s probable that we’ve ‘lost’ some sales altogether – the total for the first seven months of 2020 (44,371) is about 5,700 less than the same period last year (50,111). Even so, volumes were still much more robust in June and July alone, and property values have largely been unscathed so far (apart from Queenstown, and some of the more expensive areas of Auckland).

Indeed, perversely for these troubled economic times, the property market effects of COVID-19 haven’t been as significant as they might have been. Why is that? The obvious factor has been the sharp falls in interest rates, both for borrowers and savers. On the borrowing side, the lowest mortgage rates on record – and combined with reduced deposit requirements for investors – have directly encouraged more purchasing activity. And for savers, the falls in term deposit rates (for example) have caused them to reassess the best place for their capital, and this has seen some switch towards property.

Of course, this uncertain phase for the economy is far from over yet, and the end of the wage subsidy on 15th September will probably be associated with a fresh rise in unemployment. That will be a hindrance for the property market.

However, we entered this crazy period with a very low supply of existing listings on the market and this hasn’t changed – in fact, the latest move back up the alert levels has caused the number of appraisals generated by real estate agents to drop sharply again; which points to a smaller new flow of listings than otherwise might have been the case. In other words, the supply/demand balance could remain pretty tight in the coming months – potentially limiting achieved sales (because of a lack of choice for buyers), but also preventing any major falls in prices.


 

Keep an eye on the market and check whether the potential return figures stack up with RPNZ. Find out more about CoreLogic’s special RPNZ offer for APIA members here .

 

This is a guest blog submission from Kelvin Davidson from CoreLogic NZ. Guest submissions are a way for APIA members to share their views and experiences with each other and do not necessarily reflect the views and position of the APIA.  The content of this article is general in nature and not intended as a substitute for specific professional advice on any matters and should not be relied upon for that purpose.


ABOUT THE AUTHOR

Kelvin Davidson

Kelvin is a Senior Economist in CoreLogic’s research team. Prior to joining CoreLogic, Kelvin spent 15 years working in private sector economic consultancies in NZ and the UK, and he is well practised in applying macroeconomic trends and data to the property market.


 

Recent Posts


Tags

tenancy services property relationship recycling equity robert kiyosaki bad tenant advice Must know TCIT re agent Landlording RTAA 2019 tax tenancy issues twg report fixed-term tenancy housing affordability yield property management letting fee negotiation ring-fencing landlord structure mindset investment strategy short-term rental privacy rent increase boarding house mortgage insurance tenancy tribunal barfoot and thompson investor subdivision anti-social behaviour management watercare minor dwelling sublease HHGA covid-19 rent rental market ventilation house prices auckland Must knows commerce commission Property (Relationships) Act rta first home buying data security inspection auckland council education principal and interest khh Kris Pedersen Mortgages and Insurance off the plan building election 2017 tenant cash-flow heating government gluckman report finance interest rates RBNZ insulation housing bubble Jeff Bezos buying p lab equity lvr extractor fan partners termination election2020 personal growth ask an expert Level 4 rental wof asbestos sale and purchase market rent Investor story airbnb trespass shower dome LIM Guest blog opes partners bond nzpif water bill Standards New Zealand interest only banking parry v inglis rent arrears Editor's Choice sale and purchas wins trust scotney williams initio reserve bank financial advisers act Gluckman Tribunal case study rtaa2020 CCC buyer's agent renovation Investment tip CoreLogic skill shortage wealth creation Sponsored post income How to bond form property value speculator Case study legal market Market report meth development heater Question and answer return HHS beginner investor property cycle early termination debt enforcement positive cash flow property apprentice business worksafe Holler maintenance cgt DTI rta reform television property maintenance winz holiday house will kiwibuild clnz damage letting warren buffett meth contamination anz buying rules unitary plan warm up new zealand productivity HSWA ocr cat capital gain smoke alarm trademe Q&A ird

Archive

Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo
09 360 2376
info@apia.org.nz

The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 



Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited