Even in normal years there’s never a dull moment when it comes to analysing the NZ housing market, and this year clearly isn’t normal. In recent weeks we’ve obviously seen the move back up the alert levels, an extended wage subsidy, postponement of the general election until 17th October, and the end of the mortgage payment deferral scheme pushed out to March next year.

The heightened restrictions in Auckland have had a direct impact on our economy (given that Auckland alone accounts for 38% of GDP) as well as an indirect spillover impact around the regions via the spending that Aucklanders would normally do outside their city. Queenstown has again made the news due to this absence of Aucklanders, and it’s no surprise that our data shows early signs of ‘upper tier’ property in Queenstown being hit harder than lower-value brackets.

Indeed, our detailed analysis of the exposure of each part of the country to economic recession and a property market downturn over the next 6-12 months highlighted Queenstown and Auckland as two of the more vulnerable areas – reflecting factors such as the previous importance of international tourists, recent building booms, pre-existing housing affordability pressures, and risks that some new property investors could now sell instead.

On our analysis, Hamilton, Tauranga, Wellington, Christchurch, and Dunedin were also all ranked towards the lower end of the spectrum, but ‘provincial’ areas such as Western Bay of Plenty, Manawatu, and Ashburton placed higher – reflecting factors such as a broader-based economy, importance of agriculture and/or more favourable housing affordability. That said, we doubt that any part of the country is totally immune, just that some will fare worse (or better) than others.

Of course, it’s also important to note that we entered the first lockdown with a low supply of listings on the market and that hasn’t changed in the past few months. Certainly, we’ve heard many anecdotes of existing owner-occupiers who would like to move house, but can’t find what they want and so aren’t listing their property either – creating a vicious cycle. In other words, it’s going to remain difficult for buyers to find their ideal property, which will tend to give more support to prices.

Overall, the end of the (extended) wage subsidy will clearly be a test for the demand side of the property market, as unemployment faces more upwards pressure. But with the supply of available listings tight and mortgage interest rates potentially headed for even further falls, there are also some offsetting, supportive factors.

In this environment, we suspect that banks will continue to see a reasonable flow of new mortgage applications, but of course August’s figures are likely to have been dampened by the move back up the alert levels. With many owner-occupiers sitting tight, it could well be that most new business is either from investors (who are looking for better returns than a term deposit) or first home buyers (some who may have otherwise been off on their OE but are now looking to buy a house instead).