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Housing market: the negatives

The unprecedented covid-19 outbreak has many economists predicting a short, sharp downturn in the housing market. Tony Alexander weighs up the negatives for homeowners in a post-coronavirus environment.

Tuesday, March 31st 2020, 8:34AM 3 Comments

Job losses

"Absence of income means inability to raise a deposit, get a mortgage, and perhaps even continue to keep the house one already owns."

Loss of job security

"Even people in work will feel reluctant to purchase large items like cars, couches, and houses..."

Temporary working visa foreigners not needed

"Most will leave in the coming year. This is good for Kiwi employment. But it means housing is no longer needed for these people."

Downsizing

"To improve their ability to service debt some people will seek to trade down to a less expensive property."

Temporary net migration stalling

"For the rest of this year it seems valid to assume no foreigners will be able to shift here."

Loss of retirement wealth

"Some retired people have seen their investment portfolios lose value. To improve their cash flow position some may downsize their house."

Student apartments

"Inner-city apartment rents and prices will fall in the absence of many foreign students this year..."

Airbnb

"The complete absence of tourism this year and the much lower numbers of inbound travellers for years to come will bring Airbnb dwellings back to the market..."

Non-bank lenders downsizing

"New lenders, especially out of Australia, have been expanding their activities in New Zealand over the past year. Now they are pulling back."

Bank lending

"While lending on houses is a low risk activity for a bank, they will pull back from the market slightly."

KiwiSaver funds down

Young people  "will have to delay their purchase for perhaps 6 – 12 months".

Government bias toward tenants

The rent freeze, and no evictions extension could be "a surprise" to some landlords. 

Falling rent

"Reduced employment, visa holders leaving, students not arriving, suggest rent assumptions will need to be redone."

Pullback from regions

"Over the past four years, investors have switched their focus from Auckland out to the regions. We’ve seen this before; it often does not end well with over-supplies revealed in some locations."

Few aspirational purchases

"When the small to medium-sized business sector does well, owners buy holiday homes, homes in wealthier suburbs, homes in elite school zones, homes on the coast."

 

 

 

 

 

 

Tags: housing market

« Banks roll out mortgage holidaysHousing market: the positives »

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Comments from our readers

On 31 March 2020 at 11:53 am Anthea said:
I am a little concerned to see this article is so one-sided. Tony's newsletter highlighted both the positives and negatives of a post coronavirus economy. Perhaps a little more balance in the article would be good.
On 31 March 2020 at 12:26 pm Tony Alexander said:
Yes, I did actually list positives as well as negatives. You can find the original article here. Cheers http://tonyalexander.nz/resources/TV%20Covid-19%20No.4%20Supplement.pdf
On 1 April 2020 at 11:02 am dla06c said:
”Government bias toward tenants"

Yeah, let's just ignore that 6 month mortgage holiday. And yet, I still have to pay my landlord who is getting a holiday when he is paying the mortgage with my rent. If there was equal treatment of landlord and tenant, they would not allow a mortgage holiday unless renters were also given a rent holiday.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 2.99 2.99
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 2.95 2.99 2.80

Last updated: 16 October 2020 9:35am

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