New Zealand house prices will fall 10 to 15 percent as a result of the Covid-19 crisis, ANZ's chief economist has predicted.
During a special OneRoof debate on the future of the housing market, Sharon Zollner said that while the predicted drop would take prices back to where they were 12 to 18 months ago, it would be painful for those who bought very recently.
"We have to be realistic. The economy is looking at a horrible correction and the housing market will be part of that."
Zollner and the other guests on the panel - Carmen Vicelich, CEO of OneRoof's data partner Valocity, REINZ chief executive Bindi Norwell and Barfoot and Thompson managing director Peter Thompson - were frank in their assessments of the challenges the property market faces in the months ahead.
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However, Vicelich said New Zealand's housing market could potentially be the fastest in the world to recover.
The lockdown had accelerated innovation in the industry, she said, and the embrace of digital solutions to ensure the safe and easy operation of real estate-related business would bring certainty to the market.
“We have a chance to lead the world," Vicelich said. "New Zealand will be one of the fastest to recover, not just from seeing zero new cases of Covid-19, but, being Covid-free, will see an increased desire to buy in New Zealand,” she said.
Thompson agreed and said there were already signs of buyer activity.
“It’s pleasing to see that people are coming back now and we’ve had four multi offers just this week from people looking at properties in Level 3,” he said.
While each region would be impacted differently by Covid-19, Thompson believed main urban centres such as Christchurch, Wellington and Auckland would be affected the least. He urged buyers and sellers not to panic, but they needed to be realistic and meet the market.
For sellers, that didn't mean they should automatically drop their price but they did "need to listen to what buyers out there were saying", he said.
Unemployment was cited as a major influencing factor on market confidence. However, Zollner said net migration would be the single biggest downside risk to the market, as it had been such a huge driver of housing market success. The closure of New Zealand's borders would severely reduce migration levels. However, Zollner said this would possibly be offset by an expected slowdown in house-building.
She also said that the official cash rate could drop further - and in theory go to zero or negative levels, although she cautioned "no bank is likely to be paying you to take a mortgage". "If you get no return from putting your money in the bank, then it does force you to look for alternatives and housing is one of those."
Norwell said the removal of LVR restrictions and low interest rates would provide opportunities for first home buyers.
“Banks are really supporting first home buyers as long as they are not over stretched.”
Kiwis' interest in property has “dramatically increased” during the lockdown, with people doing their research and actively looking at the listings, she said.
“Now is the good time to do your homework about what’s right for you and keep eyes wide open,” she said.
