The deadly coronavirus poses potent threat to New Zealand's economy heading into the election, one of the country's leading economists has said.
Former chief economist for BNZ Tony Alexander told an audience of Auckland real estate agents at an event hosted by OneRoof.co.nz that the virus would hit New Zealand's tourism industry hard as international travellers put off trips while China's economic slowdown would affect importers and exporters.
Alexander believed that politicians would now be loath to see those jitters spread into the housing market and said that the virus could give property investors greater power to push back against increased regulation in the rental sector.
"All of the major parties now want house prices to rise this year," he said.
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"I don't think you are going to see many people in the Government saying, 'Let's put in place a whole new range of measures that will cause investors to sell, get house prices down and make it more affordable for young people'.
"Maybe that gives a little bit of bargaining power to people in the property investment sector."
The warning came as pundits across the world scrambled to predict the virus' economic fallout.
Two cases have now been confirmed in New Zealand, while more than 90,000 people have contracted it worldwide and 3100 have died.
A report by news agency Bloomberg found new apartment sales in China fell 90 per cent during the first week of February compared to the same time last year. In the US, the Federal Reserve cuts its benchmark interest rate to counter the virus' economic threat.
Carmen Vicelich, founder of property analysts Valocity, told the OneRoof Property Breakfast she had recently been in Singapore and was shocked to see the financial powerhouse's streets empty.
The fallout had already led Stats NZ to estimate that New Zealand's exports to China had taken an up to $300 million hit over the past four weeks, while imports of phones, electronics and clothes were being delayed, hurting local businesses.
The housing industry could also be directly hit by rising building material costs if overseas production slowed.
Yet Vicelich and Alexander remained optimistic about the housing market. Alexander tipped prices to still rise by more than 5 per cent this year.
However, OneRoof commentator Ashley Church, who was also speaking at the event, agreed that coronavirus would have an effect on the economy but felt that rather than prices booming, there would be a market slowdown prior to the election.
He disagreed with Alexander that no party would seek to introduce policies that would negatively impact the housing market, arguing that Labour was cared more about party dogma than sensible economic policy.
Martin Dunn, managing director of apartment seller City Sales, tipped market uncertainty from the virus to pass quickly, while Barfoot & Thompson reported its highest month of February house sales since 2015.
"Any signs that the virus might have on market activity is unlikely to appear before April's trading results," managing director Peter Thompson said.
OneRoof editor Owen Vaughan said it was important to look to underlying data in times of uncertainty rather than relying on hype.
One side benefit for property investors could also be that the Government was likely loath to see a drop in house prices, economist Alexander said.
Property investors had been angered at a proposed change to the Residential Tenancies Act that will prevent landlords from getting rid of tenants without reason.
They argued the law change would make it much harder for landlords to get rid of unsavoury renters, which would also affect neighbours of bad tenants who would have to put up with them for longer.
Many investors had threatened to sell their properties over the change, saying it could not only cost them more money but raise their stress levels.
Real Estate Institute chief executive Bindi Norwell said it was important to "try and keep an even keel".
"Making such significant changes to the housing market [such as removing the 90-day no-cause notice], while the wider economy is showing signs of fragility, particularly from a tourism, education and import/export perspective, may not be in the country's best interest," she said.
- OneRoof and New Zealand Herald
