I never cease to be in awe of the speed at which a story can come out of nowhere to absolutely dominate public discourse. For a time, it’s as if nothing else exists, but even the really big stories – 9/11, the Christchurch Quakes, the GFC, the Christchurch Mosque attacks – all eventually pass into history. We never forget them, but eventually time heals the wounds and their value becomes more instructive than shocking.
The latest of these, of course, is the coronavirus – now known as Covid-19. It’s hard to believe that the first reports of this virus were as recent as December 31, 2019 when news of a previously-unknown virus behind a number of pneumonia cases in Wuhan, a city in Eastern China, started to surface. Just one month later, on January 30, the World Health Organisation (WHO) designated Covid-19 a public health emergency of international concern – one of six such announcements in the past decade - and on February 23, Chinese president President Xi Jinping described the Covid-19 outbreak as the "largest public health emergency" in the country's recent history.
Since then the disease has spread rapidly – so much so that the casualty numbers in my first draft of this story, which I wrote just a few days ago, are now hopelessly out of date.
Recorded New Zealand cases of the disease are very low at the time of writing and the Government here has now introduced tough new measures to try and stem the spread of the virus including a requirement that all international arrivals must self-isolate for 14 days, except those from the Pacific Islands.
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Covid-19 is already having a profound impact on the global economy. In other words, regardless of whether the steps being taken are justified, their consequences are now a reality. Air travel, tourism, hospitality businesses and share market values have already been hit hard – and the new self isolation measures will raise these impacts to another level as travellers and concerned kiwis submit to such requirements and entire workplaces close until the crisis is over. No corner of the economy will remain untouched.
Which brings us to the property market. Do I think it will be affected by the crisis?
Yes I do.
Firstly, I now expect a big drop in open home viewings and attendance at auctions as people look to do what they can to avoid contact with others. This won’t stop houses selling - we still need to buy and sell houses for all sorts of non-discretionary reasons – but it may lead to an increase in private viewings and alternative sales techniques. The good news is that it is unlikely to have anything more than a small downward impact on house prices, if at all.
There is, however, one caveat to this. If there’s a big jump in cases, or deaths, here in New Zealand caution may turn to hysteria and voluntary isolation may even turn to compulsory isolation. If this happens, market activity would plummet, along with every other sector of the economy, and – depending on the length and severity of the crisis – house prices may go backward as people consider bigger impacts such as job security and their ability to pay a mortgage.
On the flip side – the Reserve Banks decision to drop the Official Cash rate by an unprecedented .75% in response to the crisis will stimulate business activity and have a substantial knock on effect into mortgage interest rates. This, in turn, will probably be enough to offset any reduction in other activity in the property market (although I wouldn’t expect this to lead to a big jump in prices – at least, not until the Covid-19 crisis is over).
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
