PHOTO: Auckland, NZ
If we’re right and there’s only about 70,000 property sales this year (versus almost 90,000 last year), gaining market share will be an important consideration for many firms in the sector. Investors have had a rising presence lately, so could be a segment for banks and insurers etc to focus on. Similarly, looking at areas of the country that might be least affected by the recession could be another approach – our analysis suggests that this includes ‘provincial’ areas (e.g. Manawatu, Waimakariri) that might still have favourable housing affordability or low exposure to international tourism.
A wide range of businesses obviously derive revenue from property transactions, including real estate agents, banks, mortgage brokers, and insurance firms. Unfortunately, the COVID-driven economic recession has already undermined property market activity (sales in Q2 as a whole were down by more than 35% from a year ago) and the outlook is also subdued. As the first chart shows, we estimate that there might only be about 70,000 transactions this year, down from almost 90,000 in 2019 (albeit 70,000 is an upward revision to our previous projection of about 65,000 – reflecting the relatively fast bounce-back in activity in May and June).
In turn, a low level of overall property sales means that growth for any individual business clearly needs to come from a higher market share. So where might the opportunities be over the next 6-12 months? In terms of the mix of buyers active in the market, we’ve recently seen both mortgaged and cash investors (multiple property owners) increase their share of property purchases across the country, with movers and first home buyers starting to wane a little (see the second chart). It wouldn’t be a surprise if investors remain key players in the coming months, especially the cash buyers who are looking to snap up bargains and don’t need to access bank finance.
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