Covid-19 has had an impact on almost all areas of our economy. While it’s unclear yet what the full effect is likely to be, economists agree some weakness is coming – and there could be buying opportunities for those who are in the market.
What falls are expected?
Infometrics’ economists expect house prices to fall between 5 per cent and 10 per cent over the next 12 to 18 months. ANZ went further, tipping a 10 per cent to 15 per cent drop. Meanwhile, Westpac’s chief economist Dominick Stephens has been quoted as expecting a 7 per cent fall.
The economists all said one of the biggest drivers of a drop would be the confidence of buyers – which will be influenced by the labour market. The bigger the increase in unemployment, the softer we might expect house prices to be.
Where will they be?
But these numbers hide what should be expected to be significant regional variation. While there will always be people wanting to buy or sell their houses, buyers and vendors usually take a more cautious approach in a tough market.
The property market performance will largely depend on the balance between stock and supply, and with fewer buyers in the market price are likely to soften.
Trade Me Property spokesman Nigel Jeffries has said the experience of the global financial crisis could give some insight. Then, central suburbs in main centres only had price drops of about 5 per cent, as people did what they could to hang on to their family homes. But holiday home areas experienced falls of up to 40 per cent in some places.
“That’s largely because in those holiday areas people are high leveraged into a lot of those houses and that’s the first asset they give up,” said Jeffries.
Independent economist Tony Alexander expects that there will be opportunities for buyers who are ready to jump in. He predicts that demand may be down for properties in Auckland’s inner-city apartment market, and in tourism-reliant areas such as Wanaka and Queenstown. People who had already bought another house and needed to sell their existing one would also become “motivated” sellers.
Experienced property investors tend to say it doesn’t matter what markets do as long as you purchase for the right reasons.
If you bought a house three months ago because you love it and want to live in it, it doesn’t really matter what its value does as long as you can keep paying the mortgage – and banks are being told to do whatever they can to make sure that you can.
If you own investment properties and the rent covers the mortgage, you also don’t need to worry about short-term price slides.
Thinking about your next property moves?
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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.