I think we can all be forgiven for acting as if life has returned to a pre-Covid state. Wishful thinking. You only need to switch on the news to be reminded that the pandemic is, in fact, still raging across the world. So here we are in our beautiful country making the most of our backyard. But are we fooling ourselves, just as those in Melbourne were a short time ago. Will the virus permeate our shores and communities once more? Here are a few post lockdown observations and a look at potential future issues to remind us all is not quite right in the world.
As we entered lockdown, anyone with a platform gave their predictions on what the future held for the property market (including us!). Most of the commentary was doom and gloom, foreseeing a world in disarray. Fast forward just three short months and the market has defied most predictions. In fact, it would appear prices are on the up. Just last month REINZ published the annual median house price growth with Auckland up 9.2%, Wellington 10.5% and the Hawkes Bay a whopping 18.8%. Now who could have predicted that! What’s even more unpredictable is the growth in the Otago region – up 21.7% year on year which includes Queenstown and Wanaka. There is no doubt the mass exodus of seasonal workforces and international tourists have hit the region, especially with regards to rents which are down 30%. But with New Zealanders rushing to secure a slice of this lakeside paradise for a holiday home or second dwelling, the much-anticipated market crash is yet to eventuate.
The wage subsidy has been a welcome relief for many business owners. It allowed them to retain staff and kept the economic shock at bay. But is this a case of kicking the can down the road? The real test for many businesses will be once the subsidy ends. Who has taken the steps needed to become a viable business even in the face of changing economic circumstances? How the economy fares after the subsidy ends is likely to have some influence on property prices. This is because the buoyancy of the market is driven by confidence in business and subsequently employment.
Australia had a very similar approach to New Zealand (albeit state lead) to tackle the virus in its infancy. Australia, like us, then started to ease restrictions. But no sooner had we uttered the words ‘Trans-Tasman Bubble,’ Melbourne had a flare up. This has resulted in another round of lockdowns and a situation which is currently getting worse not better. If New Zealand was to face the same fate, financially it would seem impossible for the New Zealand government to provide the same level of financial support that it did in round one. And mentally it would be hard for the people to accept, given the sacrifices made the first time around. Markets run on confidence and without it the outlook is often grim.
The world sneezes and NZ catches a cold
As a trading nation, we are susceptible to the economic health of other countries and their appetite to consume what we are selling. The good news is that we are a world class food producer with a great reputation. And now New Zealand is Covid free while the world is still in turmoil. One of this country’s Covid success stories is the exponential growth of Northland based Manuka honey producer, True Honey. With global demand for health food products like Manuka honey sky rocketing, True Honey has hired thirty new staff in an attempt to keep up with the demand. With their premium product retailing at $2700 for a 230g jar, who wouldn’t want some honey on toast! But all jokes aside, with the state of the global economy it would be naive to think we won’t be impacted.
Hiding From the Truth
I’m a bit of a political junkie so follow the election with much interest. About now is when we would ordinarily see parties rolling out big policy ideas (with even bigger budgets) in the hope of securing the favour of swing voters nationwide. Many commentators are disappointed by the lack of substantial announcements to date. But the sad reality is that irrespective of who is elected, the country is in so much debt that any pre-election promises are likely to be scrapped. Whether we are ready to face the economic truth or not, it cannot be swept under the carpet forever. Better to deliver the bad news upfront and hope the voters have forgotten by the time we hit the ballot box next cycle.
The Wellington Market
It’s no secret that the market in Wellington is strong. This has been spurred on by lowest ever interest rates, large buyer pools and ridiculously low stock levels. For anyone trying to time the market, your time is now!
Just last week we had an outstanding result on a large family home in Khandallah. After securing the property in September 2019 and spurred on by a lifestyle change to the Wairarapa, the property resold for $300,000 more with nothing spent on improvements. This may be the example of just one exceptional sale but stories of above market results have almost become the norm.
One major change over the last month is the ability to secure finance. Standard condition lengths are pushing out from five days and just last week we had an offer submitted with a fifteen-day clause. Punters are technically able to secure more finance based on reduced LVR requirements, but the banks are paying careful consideration to serviceability. And what was once a given is becoming increasingly more difficult to achieve. A ready supply of finance is imperative to keep the market moving, so the impact of tightening lending will be a game of wait and see.
WELLINGTON MARKET QUICK STATS:
WHAT’S ON THIS AUGUST IN WELLINGTON
Hurricanes vs Chiefs, 8 August 2020, Sky Stadium, 105 Waterloo Quay, Pipitea
The Hurricanes end their home Super Rugby Aotearoa schedule against a talented Chiefs outfit. Both teams will be searching for valuable points as they jostle for the title, so grab your tickets and enjoy a Saturday night out at Sky Stadium.
Deck of Chefs – Spades, Field & Green, Tuesday 11 August 6:30 pm – 11:00 pm, 262 Wakefield Street, Te Aro
Something is being shuffled, ready to be dealt to Wellington. The deck is stacked and the suits are in order. BambuchiSan (Hataitai), Field & Green (Te Aro), Daisy’s (Thorndon) and The Beach House & Kiosk (Owhiro Bay) present the inaugural Deck of Chefs dinner series.
This Town Q&A Screening 8 August 2020, Embassy Theatre, 10 Kent Terrace, Mt Victoria
Experience the quirky Kiwi comedy, This Town with Director David White and Robyn Malcolm at our Special Q&A Screening at the Embassy Theatre in Wellington. Acquitted of a crime, a young man tries to rebuild his life while an ex-cop turned Petting Zoo Owner, convinced of his murderous tendencies, tries to prove his guilt.
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.