Back in the early 1970s, just before Britain voted to join the European Economic Community, New Zealand newspapers were full of opinion and commentary about what this would mean to our economy, particularly given that Britain was the major customer for most of our goods and its entry into the Europe market meant losing that.
The economic impact of that move was devastating for New Zealand and, was a contributing factor in a 38 percent drop in our house prices between 1975 and 1980.
Nearly 50 years on and New Zealand is a completely different country, with a diverse and dynamic economy and a focus on free trade which is, ironically, a legacy of the loss of the British market in the 1970s and a determination to ensure that it is never again overly dependant on just one buyer of our goods and services.
For that reason, the Brexit events currently playing out in Britain are more of a curious distraction for most Kiwis than a matter of any real concern. We simply don’t see it as relevant to us, and even the tantalising prospect of a free trade agreement with the Brits doesn’t have the appeal that it once might have, given that we already have trade deals with much larger economies and bigger fish to fry.
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But what about our property market? Is it also immune to the events playing out in the UK, or are there ways in which it might be impacted by them?
Surprisingly, there are actually a few ways in which it could make a difference to New Zealand:
1. The most significant impact of Brexit, on our property market, will be in the form of immigration. In fact, it’s already started. Thousands of Brits, fearful of what leaving the European Union will mean to their lives and careers, are leaving the UK to make new lives in other parts of the world, including New Zealand. But there’s an expectation that a steady flow will become a torrent once Brexit actually happens – adding a further stimulus to our housing and rental markets and helping to keep prices firm until the next cycle starts. Whether that’s a good or a bad thing will depend entirely on your world view.
2. A secondary benefit of that immigration inflow will be an influx of professionals and tradespeople, many with skills and experience that can be applied to our housing design and construction industries at a time when the need for these has probably never been greater. In this respect, the UKs loss will be our gain.
3. However, it’s not all good news. Such is the extent of the uncertainty around the fallout from the Brexit debacle that British house prices, particularly in London, have dropped and the value of their pound is also down against the Kiwi dollar. This means that those Brits migrating here and leaving behind homes in the United Kingdom may have difficulty selling those homes and getting their money out anytime soon. Some, perhaps many, will either need to bite the bullet and sell at a loss – or rent, once they get here, and wait it out until the market over there eventually turns up. This will put even more pressure on our rental market at a time when the Government is implementing the most aggressively anti-landlord policies New Zealand has ever seen – all of which will add to a completely avoidable, but increasingly inevitable, rental housing crisis at some stage within the next five years.
4. There’s an outside possibility that a post-Brexit trade deal with the UK could also lead to a relaxation of rules around the flow of people and capital between the UK and New Zealand – essentially what we currently have with Australia. This could lead to UK investment in our housing sector (and vice versa) and a further stimulus to the construction industry.
- Ashley Church is the former CEO of the Property Institute of New Zealand and is now a property commentator for Oneroof.co.nz. Email him at [email protected]
