Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Six Key Drivers For The Real Estate Market In New Zealand

There are six key drivers for the real estate market in New Zealand, and most are currently underpinned by stabilising events. It is unlikely that any substantive downward trends in the real estate prices will occur in the near term. This is underpinned by numerous government economic stimulus and support solutions.

First, there are very low interest rates, and this current trend for all time low rates is a major indicator validating long term stability for the housing market. Housing growth is highly reliant on interest rates remaining low, and this factor remains likely to continue for at least 2-3 years.

Second, there is the significant influence of immigration to housing market growth trends. In the case of New Zealand, immigration is all but dead. Nevertheless, economic factors related to immigration can take 6-12 months to factor into local economies. For this reason, it is important to note that just prior to the COVID19 response, immigration remained steady, allowing for a reasonable time for positive driver for growth. Subsequent to 6 months, if immigration trends remain extremely low, this will have a significant impact on housing growth, especially in smaller regions.

Third, there are impacts related to mortgagees and over-invested landlords on the housing market. Typically in economic downturns mortgagee sales and forced housing sales increase as investors are squeezed by lenders and are forced to assess degraded incomes vs on-going costs. However two factors weigh against this. First the government initiated 6 month mortgage freeze provides a stabilising force against a majority of potential forced sales. Second, the rental market has all but frozen in place, in a state of stasis, with few people moving. Current landlords are not forced to make major decisions yet, while the government’s employment compensation guaranteed and an overall trend not to move remain for at least 3-6 months.

Fourth, real estate markets are strongly influenced by employment. The government’s immediate decision to support the job markets for at least 12 weeks has created a stabilising foundation. This has slowed the overall job declines in the near term. However, due to economic pressures job contractions will continue over the next 6 months, especially in smaller regions, and this will likely lead to regional housing market declines. However, in the larger centres like Auckland, Hamilton and Wellington, it is unlikely to force any major downward pressure on housing prices or on the housing market, as these larger regions will see a pronounced rebound in employment across sectors. This is especially true given the government’s stated intention of increasing support for job retention and overall return to pre-COVID19 business operations.

Fifth, liquidity and the availability of capital is essential to sustaining real estate growth. Although lending criteria has tightened somewhat and banks are taking a more aggressive approach to protecting from higher risk loans (first home buyers, low down payments, etc), in most cases the trend remains for improved liquidity for qualified buyers. This will sustain a number of growth dynamics for the real estate market over the next 6 months, especially in regions where job retention remains high.

Sixth, another major factor for reducing housing price growth as well as improving inventory is the building sector. This sector has all but shut down for the time being and will be unlikely to see any major growth in the near term. Nevertheless, the extreme low inventory levels will allow this sector to rebound in the next few quarters, helping to keep current housing prices stable.

These six drivers point to a reasonably stable real estate market and housing prices for the next 3-6 months.

Where trends may be negative or downward pressures exist, such as in smaller regions, housing prices will potentially encounter modest drops. Overall, people looking for large scale drops in housing prices are unlikely to see any substantive decay under the current conditions and macro-economic climate.

It is important to reiterate that no major trends downward are indicated by the housing drivers for the near term.

However, subsequent to 6 months, economic indicators, especially as they are influenced by global debt levels and production output, may have a downward influence on the overall markets in New Zealand, and cause declines in housing especially with regard to inventory and sales volumes.

Mark Rais is a writer for the technology and science industry. He volunteers as a senior editor for an on-line magazine and has written numerous articles on the influence of technology and society. He currently serves as a technology specialist for the New Zealand government.

© Scoop Media

 
 
 
Top Scoops Headlines

 

Binoy Kampmark: Biden’s Victory: A Eunuch Presidency Beckons

Whatever was set to happen on November 3, President Donald J. Trump would not lose. Falling in that establishment firebreak against democracy known as the Electoral College would not erase, let alone repudiate him. His now victorious opponent, far ... More>>

Reese Ehrlich: Foreign Correspondent: The Challenge For Joe Biden

If he’s smart, the likely President-elect will stop the unpopular endless wars and use the money to help our domestic economy. By Reese Erlich I’m pissed. I’m pissed at Donald Trump for trying to shut down the vote count early and at Republicans More>>

Boris Johnson At Sea: Coronavirus Confusion In The UK

The tide has been turning against UK Prime Minister Boris Johnson. Oafishly, he has managed to convert that tide into a deluge of dissatisfaction assisted by the gravitational pull of singular incompetence. Much of this is due to such errors of ... More>>

The Conversation: Biodiversity: Where The World Is Making Progress – And Where It’s Not

The future of biodiversity hangs in the balance. World leaders are gathering to review international targets and make new pledges for action to stem wildlife declines. Depending on whether you are a glass half-full or half-empty person, you’re likely ... More>>

The Conversation: The Numbers Suggest The Campaign For Cannabis Reform In NZ Will Outlive The Generations That Voted Against It

Like Brexit in the UK, cannabis reform in New Zealand fell into an age gap — given time, a second referendum would probably succeed. More>>

Gordon Campbell: 22 Short Takes On The US Election

Finally, the long night of Donald Trump’s presidency is over. To date, the courts have been given no cause to conclude that the exhaustively lengthy counts of those mountains of mail ballots was anything other than legal. Stacking the US Supreme ... More>>

Gordon Campbell: On How The US Supreme Court Is Undermining American Democracy

If Joe Biden is elected President next week, here comes the bad news. If Biden tries to defend Obamacare, combat climate change (via say, a variant of the Green New Deal) or tries to improve the access of US women to abortion services , he will run afoul ... More>>

The Coronavirus Republic: Three Million Infections And Rising

The United States is famed for doing things, not to scale, but off it. Size is the be-all and end-all, and the coronavirus is now doing its bit to assure that the country remains unrivalled in the charts of infection . In time, other unfortunates may well ... More>>

 
 
 
 
 
 
 
 
 
  • PublicAddress
  • Pundit
  • Kiwiblog