APIA Blog

RSS Feed

Kelvin Davidson: What lies ahead for property in the rest of 2020?

Thursday, July 09, 2020

IMG SOURCE: UPSLASH It’s obviously been an unprecedented year for the economy and property market so far in 2020, but it’s at least been reassuring that the number of appraisals generated by real estate agents, for-sale and for-rent listings, valuations ordered by banks, mortgage lending flows, and agreed sales activity have all rebounded since we left alert level four lockdown in late April.

What’s more, we entered lockdown with a low supply of total listings available on the market, so with that set alongside the release of pent-up demand for property (which couldn’t be acted upon during April), prices have held up relatively well over the past few months. Of course, ultra-low mortgage rates have also been a key support here, along with the Government’s wage subsidies and the option for borrowers to go interest-only or take a payment deferral.

But looking ahead, how might the rest of 2020 pan out? Unfortunately, the ‘good times’ that have re-emerged for property since April are more likely to fade out in the second half of the year than to roll on. After all, although we’ve been wary of the doom-mongers out there, at the same time we can’t ignore the fact that we’re in a recession and the unemployment rate has further to rise. These factors will restrain the property market in the coming months.

In addition, as we hit spring we’ll see the usual seasonal rise for listings, which will be a test for the true strength of demand – if it falters, then available supply on the market will rise steadily, and reduce the support for prices. At the same time, as wage subsidies and mortgage payment deferrals come to an end, there’ll be further tests for the property market – not to mention the General Election in September, which always tend to create uncertainty for households and property.

Sales volumes were down by 80% in April and about 50% in May, and although the results for the rest of the year won’t be as weak, we still expect activity for 2020 as a whole to be down by about 25% compared to 2019. In terms of property prices, the effects are likely to be smaller – but we have still penciled in a decline from peak to trough (potentially into 2021) of around 5-7%. That’s not great for any property owner, but would at least be a smaller decline than when they dropped by about 10% during the GFC.

Indeed, we entered this episode with mortgage rates much lower and affordability looking better than in 2007-08, banks in a stronger position to continue lending, and generally speaking more households with more equity in their homes (due to the previous loan to value ratio speed limits). This means that the risks of negative equity are reduced.

All in all, the rest of 2020 ‘could be better’, but the silver lining is that it won’t be as bad as some of the property downturns that we’ve seen in the past. And then over the longer term, the appeal of property will remain – so with many of the fundamental drivers likely to return to normality, upwards pressure on prices will start to return.

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 post. 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

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

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