While all non-essential workers are at home, trying to keep busy around the house, many of us are left wondering what effects Covid-19 is going to have on the local housing market. Whether your livelihood is directly involved with the property market, like ours. Or indirectly like many; you may have one home, two or be an investor or someone who was saving to enter the market, it’s impossible to deny that this will be an unsettling and possibly painful time for many people.
The housing market has been big in our media over the last few years and rightly so, it’s an indication of our overall economy as well as the simple fact that people need a roof over their heads. The question is, what will the fallout be now and in the long term?
Already we have seen a lot of settlements delayed, but thankfully at the time of writing there is still some buyer confidence and we have not seen a huge number of contracts cancelled due to the lockdown. Market growth is unlikely to occur initially but previous halts in the market due to economic issues have always seen a bounce back. Naturally the halt on viewing properties during the lock down is going to severely impact sales numbers over the lock down period and immediately afterwards.
Some people may argue any price correction due to Covid-19 is a needed resetting of house prices, however it’s a difficult pill to swallow for many who’s current LVR (loan-to-value ratio) is already tight and their income is affected. Also while that may be true for the main centres, we believe the prices in Southland have not been overly inflated in the recent boom.
If we look at the Global Financial Crisis in 2007 the real Southland house price had bounced back within a year, we did however see a drop in number of sales from the previous high the year before. The annual median house price for Invercargill increased in 2008 ($195,812.50)* from the previous year (2007: $187,087.50), with a slight drop in 2009 ($191,171.25) then continued growth from there. It’s important to remember that this current market shock is in stark contrast to the GFC where banks all tightened lending restrictions.
The average price for Invercargill for March 2020 was $346,800 and led the way for an annual growth rate of 19.4% in provincial South Island, but we are still the most affordable amongst the main centres. Buyers will see this as still very positive and affordable, especially those that have had a mortgage shock in other locations.
It’s true that many buyers may hold off initially until they see how the coming weeks play out, but there are still many positives in the market, particularly in Southland which may see a big and quick return to the market.
Already there was a shortage of listings and a build up of investment and first home buyers.
Although NZ may see less foreigners moving here, we may well see many of the one million New Zealanders who are overseas returning to a safer, more reliable place to be.
Some will see that all their portfolio in shares can result in obvious losses and may find that real estate ownership is still a very rewarding asset to hold.
Household debt in NZ has only increased by 40% in the last 5 years while the 5 years leading up to the GFC it was a rise of 80% – this means that financially people should be better placed to bounce back from an economic shock.
We have seen huge stimulus measures provided by the Government, and likely more to come, which will help on both the New Zealand and Southland stage.
The banks are offering very low interest rates and they are likely to remain so for some time. This will encourage people to continue buying if they are in a position to do so.
The Government direction to the main banks also provides a great opportunity to have a talk to the bank about deferring principle payments for a time if you need to. When it comes to your finances, now is the time to plan ahead.
It’s undeniable that the overall economic impact of Covid-19 is going to be enormous, but we think we are so very fortunate to be living in Southland where people and business don’t tend to over extend themselves and are generally in a strong position. Hopefully, this means we won’t have level of job losses that the rest of the country may endure.
Now is the time to be grateful that there is a great mix of businesses in Southland, with the agriculture foundation at the forefront – the strong farmers in Southland are going to provide a very good platform for our region to bounce back. We are also lucky that Tiwai has given Southland many good years of employment and service spending and we genuinely hope this continues. Every Southlander and South Islander should be applauding them as they are only asking for a user pays transmission cost, something that all of us should be demanding as well.
Having to hunker down at home and reflect on the past few years allows us to plan how we will live and take some pretty instructive lessons out of it. It is vital that we communicate and stay connected to people. We invite you to engage with us. We have been providing support and advice to our community for almost 155 years, we don’t intend on stopping now.
Southland people are a resilient bunch, very determined and can buckle down when the going gets tough, and that is how our Company and our wonderful people, with your best wishes, will get through this tumultuous time and Southland will be stronger for it.
* Statistics sourced from REINZ.
Written by Mike McCurdy, Todd & Co Realty’s Managing Director and Rural Salesperson in conjunction Charlotte Murch, Manager at Todd & Co Realty. This blog is their opinion only.