On 18th March, we wrote an article covering ten key points to be aware of in relation to COVID-19, the economy, and the property market. That article proved very popular, and given how much has changed in the past two weeks, it’s now necessary to provide another group of ten key points.

1.  No property settlements that involve the physical movement of people will be possible during the level four lockdown.
This means that the property market is basically in hiatus for the duration of this lockdown (however long it might prove to be). However, the operative word here is ‘physical’ – we’ve heard anecdotally that virtual auction/tender deals are still being looked at, and both buying and selling enquiries down this path are ‘solid’. The hope has to be that many property sales are simply deferred until the lockdown eases, rather than being lost altogether.

2.  Real estate activity is already falling sharply.
Nevertheless, not all activity can/will be deferred, and real estate enquiries have already been impacted. As we noted in a blog on Monday, comparative market analysis report ordering has fallen sharply and survey results of activity are weak.

3.  NZ will have a deep recession and rising unemployment.
The economic issues we face will also result in some sales simply never taking place. Indeed, analysts’ forecasts currently envisage our economy shrinking by 6-7% in 2020 and the unemployment rate rising from around 4% to 8-9%. In that environment, people who don’t need to move won’t.

4.  Listings were already rising prior to lockdown – hinting at a “buyer’s market” once we re-emerge.
However, not everybody can choose if they move/sell or not, and there were signs prior to the lockdown of some owners looking to get their property on the market, maybe because they feared a job loss and keen to raise some cash (perhaps reversing a recent purchase of an investment property). A rising unemployment rate will unfortunately prompt more people to sell too.

5.  At least the fiscal/banking support measures should help to limit the rise in unemployment and ‘forced’ property sales.
It’s in nobody’s interest to have a wave of mortgagee sales, so it’s reassuring that the fiscal support measures such as wage subsidies and business finance support (i.e. carry-over loans), as well as the Reserve Bank’s asset purchase programme, should help to at least limit the rise in unemployment.

6.  Mortgage repayment deferral scheme will help many households too.
A six-month window of not having to pay interest or principal will be a huge boost for many households, although the flipside is that they’ll have a larger mortgage when things settle down again.

7.  Landlords’ returns likely to be affected by changing market structure.
The tourism downturn will see many properties currently in the short-term/holiday rental market (e.g. Airbnb) shift into the traditional, long-term sector (or they’ll be sold). That rise in the supply of long-term rentals will dampen open market rental growth and could even see rents fall. At the same time, rent increases on existing tenancies have been frozen, and landlords will also be affected by rising unemployment and some tenants running into problems with paying their rent – although at least investors can also apply for a mortgage deferral under certain situations.

8.  There will be regional differences reflecting varying economic bases.
This tourism-heavy recession will knock some parts of NZ more than others, with Queenstown standing out as a key vulnerability, given 15-20% of its economy is accommodation & food services. By contrast, although nowhere is immune, places such as Invercargill (given importance of electricity/gas supply and healthcare to its economy) and Napier (healthcare, professional/technical services) could be less affected, both in terms of their economies and property markets.

9.  Property market data and statistics will have less ‘recency’.
As things stand right now, we at CoreLogic intend to continue to publish our usual range of statistics throughout this period of disruption; it’s just that the datasets might contain a lower share of the very latest readings. We will provide material on the reliability of each release where relevant, and in some cases, may have no choice but to postpone or cancel.

10.  Finally, this isn’t a market insight, but please send us your questions, insights, anecdotes etc.
We will all have to rely on fewer ‘hard facts’ in regards to the property market over the next few weeks and our goal is to be timely, objective, balanced, and insightful. To do that, we’ll need ‘on the ground’ information for our podcasts, videos, and written content – so please let us know by contacting either myself or CoreLogic's Head of Research Nick Goodall!