Post-Covid-19: Experts' biggest fears - and what gives them hope

The housing market will be fully open for business again on Thursday, after nearly two months of disruption caused by Covid-19. Alert level 2 means the return of open homes and public auctions, albeit with appropriate safety measures in place, and will be a boost for buyers and sellers.

Over the last seven days, OneRoof canvassed real estate leaders, economists and finance experts for their views on where the market is likely to head in the coming months, and to identify the areas of risk and opportunity.

Ray White New Zealand Chief Executive Carey Smith says the move to alert level 2 restrictions will allow a more “normal” operating environment for buyers and sellers and he expects "quantum lift" in sales in the weeks ahead.

“Our group saw extraordinarily high numbers of buyers inspecting property under the restricted private viewing provisions of level 3. This has resulted in sales being negotiated remotely,” h says.

“While this has been part of the guidelines in level 3, this will now change to enable more competition to be introduced with open homes, and also combining the ability to undertake online auctions or auctions in-rooms with safe distancing.

“The move to level 2 is expected to see sales take a quantum lift and start to migrate back towards the previous levels during the latter part of May and June."

Smith says that listings across the country are lower but this is an opportunity for those thinking of bringing their property market to capitalise on a deep buyer pool.

ANZ chief economist Sharon Zollner says the Government’s lockdown strategy will have given the economy a fighting chance to come through the crisis. “The level 4 lockdown has worked. It’s achieved what it set out to do, and, even better than flattening the curve, we’ve got elimination,” she says. “We’ve got a much better shot of a sustainable return to normal life, even before there’s a vaccine.”

While she predicts a 10-15 percent drop in house prices, she notes that only takes prices back to where they were a year or two ago. “Apartments will be more vulnerable, and highly leveraged investors will have to sell up, but first home buyers will cling on as long as they can,” she says, adding that any sliding back to level 4 "will be an absolute death knell”.

Zollner’s worries that people will be reluctant to spend again as a result of increasing household debt. She adds: “What we don’t know is how long small and medium firms looking ahead will think, ‘I’m toast, but I will stay nominally in operations so my people will get the wage subsidy.’

“There will be a wave of insolvency and redundancy. We don’t want to create ‘zombie firms’, we need to free up for new operations, but it can be a quite brutal process and it’s not fast.”

Andrew Eagles, the chief executive of New Zealand Green Building Council, says there's been an increase in support for a “green recovery” post Covid-19. “In Wellington there’s a $25 million project to make 10,000 homes healthier and warmer and it could be happening up and down the country,” he says.

But Eagles fears the pandemic could be used to push or roll back legislation aimed at improving standards in the rental market. The government put in place Healthy Homes standards three years ago and landlords have a deadline of July 2020 to comply. However, there are calls being made to extend the deadline. “We’ve been waiting years for it and now, because of the four to six-week period where landlords couldn’t get work done, they are pushing back and asking for an extension for a whole year.”

Dame Fran Wilde, the chairwoman of the Urban Development Institute of New Zealand, an organisation that brings together local and central government, developers and designers to champion urban design, believes the crisis will speed up change.

“During lockdown, people will have been frustrated if their urban environment didn’t work for them or their family, for example if they always had to drive to shops or amenities,” she says.

Wilde is pleased that the government is fast-tracking new urban projects. “We have the opportunity for great urban developments, and bring that speed to other areas of consenting. “We don’t want another leaky homes [scandal] - that would be intolerable - but there’s much red tape that can be cut.”

EnableMe founder and financial advisor Hannah McQueen is cheered by the fact that people are now more aware of their spending and saving habits.

“Before the lockdown, most Kiwis didn’t care, but the crisis has hammered a lot of people. The lockdown will have been the first time a lot of people looked at their bank statements and realised where their money goes,” she says.

She says a forced change in spending habits could be beneficial for Kiwis’ long-term financial health, but she acknowledges financial pressures will leave many worse off. “The feeling is that someone set fire to your house and you’re trying to run around, do what you can, make sure the kids are okay but the world has shifted and no amount of government funding will disguise that.”

Daniel Horrobin, director of Ray White’s City Realty Group in central Auckland, says buyers and sellers have positively adjusted to the new normality, and that gives him hope for the market in the months ahead. However, he has concerns about the effects of Covid-19 on the economy, in particular small businesses. “We need to make sure they come out strong on the other side and do every bit we can to support them.”

Harcourts agent Diego Traglia, who operates in West Auckland, expects the market to be on the receiving end of a "sugar hit". He says buyers who had been active before Covid-19 struck will still looking to buy, with those who sold before lockdown under pressure to secure a new home. "The biggest challenge I am facing is the lack of listings. There are very few new properties being brought to market, and the ones that are listed are inundated with enquiries and viewing requests."

Heath Young, CEO of Realty Services Limited, which operates EVES and Bayleys in the Bay of Plenty, Waikato and Taranaki, says there are risks in looking too far ahead.

“I remind people that when we got the lockdown news, a lot of people were thinking the worst – six or eight weeks or more. But it wasn’t. As long as the medical side works, we will get through this and out the other end.

“We’re in a very attractive part of the country, so there’s high demand for internal migration. There are plenty of things to look forward to.”