Ok guys. Let's assume this virus is going to bite the NZ economy.
What flow on effect, if any, can we expect in the property market ?
Ok guys. Let's assume this virus is going to bite the NZ economy.
What flow on effect, if any, can we expect in the property market ?
If the virus turns out to be a lot worse , there could be more deaths .If this is concentrated in older people maybe a few more houses on the market due to estate sales .
More supply , coupled with a slower economy due to the virus , property prices could dip. Crystal ball stuff though .....
There will be a slowdown in the economy and that will lead to job losses. If these are significant enough then there will be:
1) An increase in people who can't pay their mortgages and being forced to sell (if they can)
2) An increase in people who can't afford their rent and being forced into cheaper accommodation (if they can)
3) Point 2 will lead back to point 1
4) Even if they aren't enough for 1-3 to occur it is likely to dampen peoples appetite for debt so trading up will be off the agenda as well
The key questions are:
1) Will the job losses be significant enough
2) Will they last long enough
I am still doubtful of that but don't think we would be far away from point 4 happening already.
Yes, I guess I have been thinking more along the lines of a reality check for property. I think at least some of the recent market exuberance has been due to a healthy economy. How healthy our economy will look in 12 months time is another matter.
A friend owns 4 Airbnbs in QT, he is rooted and he's far from the only one.
My accountant expects 20-30% of his clients will lose their businesses and go to the wall.
Rents will be the first thing people stop paying, home settlements will start falling over soon causing a chain reaction for the others down the line.
Get ready for the domino's to start falling.
I agree been trying to get the wife on board to sell our Central Otago home and go and rent(Is up like 70% last few year in value) .. going to be so many Airbnb/bookbach etc looking for income will force rents downwards from its 3-4% gross yields locally to even lower ... will force prices down ... many spec jobs in the works nil buyers ... will be a chain reaction sellers fighting for limited buyers
Don't forget first home buyers whose chances of buying rest on their decimated Kiwisaver accounts....
1st home buyers don't typically use what they've saved in Kiwi Saver. To meet their 20% deposit at the bank, most I see do it with accumulated savings from work income. Because the net 6% of their annual income contribution is not a lot when a house is $500K to $1M pending where you live.
As I mentioned in other posts, the biggest problem is ethics in the Kiwi Saver scheme where managed funds still charge a fee in times when the market crashes. There should be NO reward for that just like in the same way if a tradesman screws some kitchen work, or plumber causes damage, or a mechanic didn't fix the car right ; NO ONE should be rewarded or paid for have underperformance in a managed fund. Likewise, NZ's FIF should not tax these funds on negative paper losses (is that ethically right?).
https://www.wired.co.uk/article/airb...navirus-london
https://www.businessinsider.com.au/c...stralia-2020-3
A couple of interesting developments right now in foreign markets. Interesting on what happens after these get pumped onto the rental markets, or into the housing markets and increase supply on that side. Whatever the net effect is, it won't get good on home owners..
True about the AirBNB drying up. But the bigger impact in my opinion is the loss of jobs. Gov't bail outs for short term 3 - 6 months won't hold long if businesses don't come back. Property foreclosures and central banks can no longer lower interest rates. The next step would be banks will charge cash holders for keeping funds in their accounts. Remember... the deal with tourism is entirely dependent on peoples disposable income and savings. When that is all dried up... watch out.
Unemployment will definitely be the key factor in a NZ property drop. Unemployment always the key factor.
Here you go doomers, scare yourself witless with the mutations
Stay at home.
Influenza virus and corona virus are two different virus. It is not just another flu strain. Stick to the facts please......
It still does not alter my point. The number of deaths still needs to be viewed in perspective.
The 1918-20 flu pandemic is estimated to have killed between 40 and 100 million people worldwide.
Let's stick with the low estimate of 40 million, out of a world population of roughly two billion.
Apply that percentage to the current global population of about 8 billion.
We're not even close.
Good article by Dr Roy Spencer:
https://www.drroyspencer.com/2020/03...ality-is-down/
As I am sure you are aware, seasonal flu is a global killer, with 300,000 to 650,000 deaths on average each year, mainly among the elderly and those with pre-existing health conditions. At this writing, COVID-19 has killed 10% or less of that number. (Yes, I realize that number might have been considerably higher if not for our response).
90% of those deaths were this month. Flu deaths spread over the year. If yesterday's deaths happened every day for a year that would total 1.3 million.
It's not clear to me that the disease is dramatically more deadly than flu due to the issue of knowing the number of infected. However, as it's novel (no immunity or vaccine) and very fast spreading it is rather more dangerous than the regular flu season, which itself has the capacity to overwhelm medical systems in a bad year.
Getting back on topic, my guess at this stage is non residential real estate will be impacted negatively by the impending economic downturn. The unknown at this stage is will the downtown impact the residential market ?
Yes, high unemployment is the driver for mortgage defaults. If we get to 15% + as predicted house prices will fall.
https://www.nzherald.co.nz/nz/news/a...ectid=12322474
And this is perhaps the first indication of how things will be. Unemployment peaked at 6.7% during the GFC which was quiet mild on global standards, but this is a bit different. I mean during the GFC, at least companies could still operate and trade.
I know quiet a few people who are very highly leveraged, with house prices as high as they were the loans taken out during the past few highs have been so high. There could be waves of houses going back onto the market as mortgagee sales..
As I live close to Cromwell I'm going to be keeping a close eye on listing numbers in the local property markets ..Queenstown currently has 497 listings -but with many listings covering many hundreds of new apartments coming into a tourism collapse like NZ has never seen- I think it will rise to record levels in turn stopping the Neg+Auctions price hyperbole ... to a race to exit listings when the reality sets in we will see many more price advertising ...
Wanaka + Cromwell both will come under pressure as well ... IMHO. I think we will see 10-20% pull back in prices for good properties (freehold family homes in good locations) but see much larger falls in -Apartments/units/tiny family homes upwards to 50% etc
I have played Golf with many local RE agents over end 2019/20 and they have all seen a real slow-down in the sector ,,,, so COVID is hitting right when the market was getting weaker
That's a derogatory term, and a derogatory comment. Are those who pull out of bidding at an auction once they don't think the price represents a bargain, bottom feeders. Are those who rush into retail stores when they promote a big sale bottom feeders? With property would you prefer banks step in to sell the property rather than let the market find the price? Markets are stimulated by reduced prices - and vendors only accept prices if they want to i.e. if they find any alternative worse. Bargain hunters are a necessary part of commerce and keep the world turning, so no need to saddle them with an insulting handle.
So true. Anyone buying an asset at any price is a bottom reader. Otherwise why buy.
The only true Winners are bottom feeders. The rest are mugs.
Well there is going be a huge amount of supply I see just here in Cromwell region another 30x property listings last few weeks ..pain will really come on during winter IMHO could see a spike of forced sales ... during GFC I seen a few properties selling at auction 50% less than asking only months before
A good read on why house prices may not fall as much as many are predicting (and hoping?) :
https://www.stuff.co.nz/life-style/h...-as-you-expect
"These many factors will not prevent house prices on average from falling over the remainder of this year in the face of heightened job insecurity and income losses for so many business owners. But they will mitigate declines and set the scene for a 2021 recovery."
A new and different view emerging. Maybe Sweden got it right ! https://www.bloomberg.com/news/artic...ina-scientists
Countries need a well funded social welfare and health system to try what Sweden did. The British tried it and when you include the deaths in their rest homes (which their government had been excluding) they have the highest death rate in Europe - they are leaving their people to die in their beds. The Brits will be hoping a vaccine will save them from their shambolic response to Covid that had initially been based on herd immunity. It seems the senior adviser to the UK Conservative government likes to use the UK as a laboratory experiment both in relation to Brexit as well as Covid 19.
There are suggestions that COVID was widespread in the Uk as far back as January without them having any idea about it and being far too late to react once they realised it. Here is an interesting interview with a genetics expert that has probably done more studies into the virus than most https://news.sky.com/story/coronavir...xpert-11979580
Think the market will head south, was well overheated nationally. And if you are a real estate agent stop telling me that my house is my biggest asset - its not!
I´m obviously doing it wrong then FP. I´m over 45 yo and my house is my biggest single asset in a diversified portfolio. I assume most people are in the same situation. But I may be wrong about that but it certainly applies to most of my friends similar age !
Well... on my street in recent years, a house goes up for sale and it is bought by some conglomerate group holding and they rent the cra* out of it. I'm in a new sub-division that went for sale in 2010 and most of the original owners have sold and moved on. Some are families but because of the high commanding price, it seems the houses get sold to the highest bidder which are those property investment scheme investors that turn the house into an ATM. I'm hoping a drop of 20 or 30% price correction.
That is quite well done for someone in the mid to late 40's. I don't think many of my friends would be in such positions, although I don't know tbh. However some of them have multi million dollar homes (Average prices in their suburbs) with chunky mortgages.
That's Auckland for you. They could shoe-horn their families into a two bedroom unit in the same suburb or move further out and face a long congested commute (when things get back to normal!) and have a decent size average house for a little under 2 million I guess.
So I'm in Queenstown at the moment, drove in from Christchurch and the place is... not dead yet.
The true litmus test of economic activity would have to be the length of the line at Fergburger. No line, but the place was doing steady trade in $15 burgers and all seats and tables were full.
Still a bit of traffic on the roads, none of the queues we used to see coming into the centre.
Quite a few groups of people drinking and laughing on the Lakefront, I guess these are young locals/workers looking for cheap entertainment while things aren't quite as lively as they used to be. I would say the restaurants and bars were half full last night (a Tuesday).
I've seen no evidence of people yet dropping property prices, I do struggle to see how further satellites like Glenorchy will continue to demand 700k for a few acres. Off to Wanaka tomorrow and will be interesting to compare.
Times I've been to Queenstown post Corona (4x), been surprised how busy the supermarket, shops and centre of town has been. Not sure where everyone comes from, but certainly a decent-sized queue for handouts at the supermarket.
Friend was out on the tiles weekend before last and said it was heaving......
Still those construction projects to be completed etc, so interesting to see what happens when they finish, and job subsidy rolls off. A lot of the tradies commute in from Cromwell - so this would be hit. And if you bought a property in Kingston - well that's your own fault.
One of ours works min wage in a daytime café in Wellington CBD. Mainly public service clients. Back to full hours this week.
My city-based tenants have cut back to Tues-Sunday and reduced their hours. They're sliding back to around 60% of normal. Their colleagues report a similar situation, whereby the initial burst of post-lockdown euphoria has given way to a more somber mood. Redundancies at the firms of my clients are starting to take place, and these are all outside the tourism and hospitality sector.
And this weather takes alot of people inward and down on top of that.Sun, vitamin D , melatonin outside exercise is what i need.
https://www.nzherald.co.nz/business/...ectid=12343394
Qtn getting funding from our leader with the limitless creditcard