Coronavirus and property
WOW. What a whirlwind of change. Barely three months ago the world was ticking along nicely, the Auckland market was back and booming and stocks were hitting record prices. We had winter getaways booked and Trump was licking his lips with the prospect of re-election.
Our new reality? Forget you ever had a plan. And don’t even think about making one. Because there is no timeframe for our ‘new normal’. But we do have plenty of time to sit and ponder just how will coronavirus impact the market? The answer to that question is still largely unknown. But here is our best guess!
Fear is a strong emotion, one that is hard wired into our DNA. When you get something as enormous as the current pandemic, it hits at both our real and perceived sense of fear. Fear that you could lose your job. Fear that you could contract the virus, get sick or even die. And fear that that your world could come to an end. The first two scenarios are real. The third perceived. The world will continue. Things will revert to some sense of normality at some stage, although perhaps a modified version of its previous self. The economy will undoubtedly take a hit and perhaps for many, many years to come. But eventually the fear will pass and at some stage optimism will return.
Fundamentally we still have a housing shortage and our current situation is only likely to exacerbate this issue. There are a few factors which are likely to contribute to this
- Kiwi’s based overseas are returning home in their droves and once restrictions are lifted, they will need somewhere to live
- The construction industry has come to a grinding halt and with capital taking a hit, it may fail to return to pre-lockdown activity levels for the foreseeable future
- When it comes to the housing market there will be great uncertainty among vendors who have little motivation to sell. Many may wait for reports of a rebound before bringing their home to the market.
For the first time in over a decade, millions of Kiwis will be experiencing their first taste of loss aversion, because Kiwisaver accounts (stocks) provide a visual representation of our current situation. Any financial advisor worth their salt will advise you to ‘ignore the noise’ as over time markets trend upwards. That is all very well and good for those of us already on the property ladder. But for first home buyers looking to secure a home (using their Kiwisaver fund as a deposit) they have just taken an almighty hit. The outcome of this? Reduced borrowing capacity and a requirement to keep saving or wait for the stock market to rebound. We last saw this in 2013 when the Reserve Bank changed the LVR (Loan to value ratio) from 10-20% seemingly overnight. The effect on the market? An inability for people to move up the ladder because of reduced activity in the entry level sector of the market. When that sector eventually saved the additional deposit; the market started moving again.
Long term buyer behavior
An article published last week by US based Real Estate tech strategist, Mike Delprete made some interesting points around how this pandemic may change the landscape of how we view and transact property.
In the lead up to lockdown we moved to controlled open homes with social distancing, and then private viewings only. Our online listings were support by virtual tours, floorplans and in some cases videos in an attempt at safeguarding our vendors if the event their properties were no longer accessible by the public at large. As Mike noted, online tours won’t save the industry as nothing beats an in-home inspection. But they may become the post-pandemic norm as customer needs evolve and social distancing is no longer a foreign concept. Which got me thinking, is there even a place for the good ol’ fashioned handshake in the future of mankind?
‘One trick pony’ towns
Historically New Zealand has been guilty of putting our eggs in a couple of baskets, with tourism pre-Coronavirus our biggest export earner. Virtually overnight we lost that revenue and the doomsayers amongst us predicting it may never be the same again.
In tourism focused towns such as Queenstown businesses have closed, and job losses are in their thousands. The seasonal workers have long since returned home, hotels and streets are deserted, and what was a housing shortage has become a massive oversupply. It’s only natural to assume that property prices will take a significant hit. At least for now.
The Wellington Market
Post the GFC Wellington city experienced a drop of around 5% in value with most of that be clawed back over the subsequent 12-month period. So why are we so well positioned to weather the storm? Given that we are the capital, and a large proportion of our workforce is linked to the public sector, our population is likely to have better job security. In times of uncertainty people look to move to larger population bases for that same reassurance of income. And given our shortage of land and housing, some ‘stability’ of our market is likely to fare somewhat better than others.
If you’re like us, working in industries which have come to a bit of a standstill in the current climate you’re likely to be looking for ways to spend your day. At present our team is using this valuable time to update process manuals and train, train, train. In our bubble we are taking this opportunity to take a breath and spend valuable time with our three kids. Here are a couple of ways we can help you while away the hours;
For the kids
Our Easter Colouring competition is up and running. The WINNERS for all age groups will be announced next Thursday, with a large Easter haul to be delivered post lockdown. If you have little ones in the age range between kindy and year 6, this might just be the distraction they need. Just click the link, download the entry, send Amanda a photo of the finished product to firstname.lastname@example.org by next Wednesday and Bob’s your uncle! Easter Colouring competition
For the adults
We’re still offering market price updates, albeit in a different format. Let us know if you have 20 minutes and you would like to give us a virtual tour of your home. As always, we are happy to spend some time with you providing advice and chatting through the state of the market.
For Now – Stay Safe. Be Kind. Save Lives.
WELLINGTON MARKET QUICK FACTS
Average sale price by Ward:
Key Covid-19 Websites
New Zealand Government:
Learn the simple steps you can take to unite against the virus and slow its spread. Find out what help is available, FAQs and get the latest updates. We can slow the spread. Unite against COVID-19.
Ministry of Health:
The latest health advice for the general public on COVID-19 (novel coronavirus).
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always happy to help.