It’s not all Doom and Gloom

When you find yourself in an uncomfortable situation, very often, the first response is to panic and the second response is to duck and take cover. As humans, we are notorious in uncertainty for adopting the “wait and see” approach. Now history tells us that sometimes the “wait and see” approach works out well, but in our current economic climate, if you are a vendor, a buyer or an investor – there has never been a better time to act.

Amidst the current levels of uncertainty, there are a great number of factors which will help protect the property market against the worst effects of this virus.

Here’s our list.

1. Mortgage rates have been at record lows and are now headed even lower courtesy of the Reserve Bank’s aggressive easing of monetary policy. The reality is that there are plenty of people who want to buy houses because interest rates are so low. It’s better than renting, affordability has never been better.
2. Housing debt grew by 90 per cent in the five years leading into the late-2008 GFC. Growth for the past five years has been just 41 per cent.
3. Banks are likely to tighten lending criteria. But their capital bases and funding lines are not under threat to the same degree as during the GFC so the drive to curtail lending will be less.
4. The long-term fundamentals of supply and demand remain unchanged. There are housing shortages across the country, many people eager to buy, not enough listings and many investors increasingly disappointed with term deposit rates (and maybe now warier of volatile share markets).
5. Educated sellers will spot the opportunities, particularly as they will be competing with fewer homes on the market in the traditionally quieter winter months. Once the virus slows down buyers will be competing against many other people who all have been waiting.

It’s said that Kiwis were set to make over 3.2 million trips overseas this year. With travel plans cancelled, where will the saved billions of dollars go? Some will go on domestic holidays, some into savings, some on electronics, and some might go toward financing a new house or a property investment.

The main point is, we have a housing shortage that is not subsiding anytime soon so take a high-level view and do not be driven by fear-mongering.