If past recessions are anything to go by, Wellington real estate will come through the Covid-19 crisis better than most parts of the country, experts say.
Economist Gareth Kiernan, chief forecaster at Infometrics, says experience shows the Wellington economy and housing market tend to avoid the worst in downturns because of the prevalence of public sector employment in the region.
While the private sector is going through retrenching and potential job losses, that’s not likely across the public sector, meaning there will be fewer labour market issues to create downward pressure in the housing market in the capital.
While Kiernan stopped well short of saying Wellington could boom, he did say above average levels of input in terms of Government employment and activity could help the market.
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"I guess I’d like to phrase it in mitigating the negative effects, rather than having a positive effect."
Supply issues
Wellington is also a bit shielded as it has relatively low housing stock volume anyway, compared to other parts of the country.
“There have been signs of an under-supply of housing in Wellington and supply issues there, which is shown in some of the indicators we look at, and that would tend to also eliminate the downward pressure we would expect to see on house prices in the region,” he says.
While the Wellington market is more stable, Kiernan still expects to see house price falls.
“We’re forecasting a decline nationwide of 11 per cent by the end of next year and so for Wellington, probably not to that level, maybe a more moderate drop.”
Waiting in the wings
Antonia Brown, from Harcourts Wellington City, says it already feels like Wellington has been shielded from the worst and more sellers are needed to come to market because buyers are there.
The move to alert level 3 meant people waiting in the wings could view properties in person.
“We’re getting offers on all of them, multiple offers on all of them, and the prices have not come down, so in one week we’re fully busy looking after our vendors. Those who have chosen to come on the market are also getting good levels of inquiry.”
Listings are lower with some vendors choosing to wait and see what happens, but that could change as soon as the country moves to level 2 on May 14.
But Wellington is a stable market anyway, Brown agrees.
“We haven’t had the highs and lows that particularly the Auckland region has and neither do we traditionally.
“We’ve got a very stable employment market with a lot of Wellingtonians having fairly good job security because they’re employed through various mechanisms of the Government, whether that’s contracting or public servants, or whatever. There’s quite a good infrastructure. “
That means Wellington is in a good place, she says.
“Early signs are that we’ve got good cashed up buyers, prices as strong as before lockdown. We’re encouraging sellers to come to the market now because we are getting good results even though the process is a little bit unusual, with open homes canned and auctions online.”
A "blip"
Paul Dickason, from Professionals Wellington City & Suburbs, says historic house price data showed the Global Financial Crisis to be a short-lived blip in Wellington and that's what he expects in the wake of Covid-19.
“Wellington is very safe and always has been,” he says.
He, too, points to the workforce.
“For every head you can count in Government there are three other support industries, so Wellington as a whole is very, very insulated. We are going to feel the recession just like the rest of the world but Wellington will perform better, or substantially better, than other regions," he says.
“If you’re in an area where financially the economy goes up and down, then I guess desperation leads the market for a while and then normal economics kick in, but Wellington, because there are so many people that are in relatively stable jobs, then the market’s not driven.”
The GFC blip wasn’t big or long then went absolutely flat.
“That’s what Wellington’s going to do. We’ll have a blip. There will be a few media-worthy sales, people will go ‘that’s terrible’, just like everywhere else, then it will go flat and it will stay stable.”
Dickason says people in pricey suburbs and expensive houses will have value drops and will have to sit out the next four to five years, at least, to return to the same value levels for their property, but he predicts most home-owners will be okay.
“If you’re in an honest Kiwi house in an honest Kiwi suburb with an honest price or value of your home, I would say pretty much anywhere in New Zealand you’re in a good space.
“What tends to get wiped out is the top end of the market. There’s a flight to affordability so if you’re in an affordable home, you’re so safe.”
