Market Pulse – CoreLogic | AUGUST 2020

And just like that, we realised that NZ isn’t immune to the recurrence of COVID-19.  With the country returning to varying states of lockdown as the authorities try and clamp down on the current outbreak, I realise there’s a tremendous sense of disappointment and anxiety.  Disappointment as I think we’d become overconfident, especially with New Zealand appearing as the poster child for dealing with the virus on the international stage; and anxiety as we start wearing face masks, scanning those QR Codes and keeping away from others.

The postponement of the NZ Election announced today by Jacinda Ardern was a sensible move, considering public sentiment, with over 60% of new Zealanders surveyed wanting to delay the election according to an NZ Herald Poll.

Despite the rise in cases being reported and the change to Alert Levels, I think most Kiwis are keeping resolute that we’ve beaten this before and we can beat it again.  Of course the hope is that we can do this without too much of a dent in an already fragile economy.  Luckily there’s still around $15bn allocated in the “war chest” to extend the wage subsidy and other government support.  Likewise, a decision on the mortgage deferral (often incorrectly called a “holiday”) will be made this week, most likely extending further.

Last week’s OCR announcement was not unexpected, holding at 0.25% for now, but with stronger indications that we’ll probably be heading into negative territory early next year as well as funding for mortgage lending from the Reserve Bank to cover the drop in saving deposits which are a major source of funding for lenders.  Remember negative OCR doesn’t mean banks will be paying us to buy our retirement homes on Waiheke Island, because there’s still retail margins to factor in, but we might see sub-2% rates before all of this is over.

Last week REINZ announced strong sales activity in July, up 25% compared to last year and hot on the heels of June’s 11% year on year growth.  However, anyone watching their local markets closely may have noticed that this is resulting in a severe shortage of properties for sale currently.

Our Early Market Indicators are showing that Pre-Listing Activity has fallen away again – 27% down last week compared to the week before and whilst the QV House Price Index for July shows resilience and continued growth those moving as opposed to selling investment properties might realise a strong sales price, but struggle to find anything to buy.

However, despite all of that, let’s still be thankful that we’re in a better position that most countries and our “Team of 5 Million” can stand strong and work together to beat this again.

Richard Deakin

CoreLogic New Zealand