Action! Like in the movies, there is plenty of action in the NZ property market!
Firstly in mortgage interest rates – ANZ has dropped its one-year fixed home loan rate to 2.79 per cent.
It follows other major banks dropping below 3 per cent for the first time as the mortgage competition continues to bring in new customers amid the Covid-19 pandemic.
ANZ also dropped other fixed rates: 18-months (3.05 per cent), 2-year (2.95 per cent) and 3-year (3.35 per cent).
The new rates will take fixed home loan rates “well beyond historic lows” said Ben Kelleher, ANZ managing director retail and business banking.
Kiwbank and Westpac also have special rates for certain customers at 2.65% and 2.69% pa.
Despite Govt calls for the banks to be more supportive of the community, these are publicly listed companies responsible to shareholders. Banks had far more to lose than the Reserve Bank. They are putting their own (or at least their depositors) money on the line and the consequences of making a mistake could be disastrous – so the idea that they can hand out money willy-nilly is simply wrong. The banks are being naturally cautious because of Covid-19 as they don’t have a crystal ball. Rather than rushing in to offer mortgages to anyone who wants one, the banks are currently sitting back and taking a wait and see approach to the market so as to see what happens to property values over the next two or three months before making any further risk decisions. This is a responsible strategy and in keeping with what we’ve seen in the past and is no doubt expected by their shareholders.
As example, Dominick Stephens, Westpac chief economist, is forecasting a 7 per cent national house price decline from March till the end of the year, based on past recessions: in the early-1990s,
prices fell 2.9 per cent, 4.6 per cent in 1998 and 10.5 per cent in 2008.
Dominick Stephens, Westpac chief economist
“We are bracing for something in a similar range this time. That said, the economy will come out of the Covid-19 recession with extremely low interest rates and no LVR mortgage lending restrictions. We expect house prices to remain very subdued in 2021, but to rise 11 per cent during 2022 in response to those low interest rates. That would be an earlier recovery than after previous recessions, but the pace of increase would be similar to that experienced after past recessions,” Stephens said.
In the real estate market itself, Auckland house sales by the city’s largest agency more than halved in May compared to the same month last year.
Barfoot & Thompson released house sales data for May, a month when New Zealand was mainly at alert level 3. Peter Thompson, managing director, said only 396 homes were sold last month, compared to 821 in May, 2019.
How sales continue to play out between now and Christmas is still anyone’s guess but with banks not lending as much as many buyers will like, it is hard to see sales return to Spring 2019 levels this year.
Like after the GFC, when real estate sales activity declined significantly, Covid-19 has likely changed Kiwi spending plans, with some property-owners now looking to upgrade and improve their home in time for summer.
Money that would have previously been earmarked for an overseas holiday is being diverted to fund big renovations.
Auckland landscaper Joey Rogers says that enquiries normally drop by more 30 per cent at this time of year but post lockdown, he’s been busier than ever, with homeowners seeking new decks and improved gardens.
“We are doing a lot of retaining walls, concreting and deck-building at the moment,” he says.
People want to their upgrade decks and make them larger, Rogers says, “because for six weeks of lockdown people have been sitting in their little patios. Now they want to put chairs out and walk around it.”
Swimming pools are also in demand. With overseas holidays unlikely to return anytime soon, buyers are eyeing homes that can them a holiday feel.
Christchurch agent Adam Heazlewood says interest in swimming pools has noticeably increased, with one of his listings in Merivale becoming a magnet for buyers due to its outdoor pool.
“We’ve noticed the demand for it has been quite high. We don’t know if lack of travel is the reason, but people did mention that they love a pool, so maybe the lockdown has triggered this,” he says.
Glenn Jillings, who owns pool installation firm Watchman Developments, says swimming pools have been steadily rising in popularity in Auckland over the last three years and will be particularly desirable now.
“The opportunity to travel isn’t there which will increase the demand and make pools more appealing in the next 12 months,” he says.
“Some homeowners will rather invest in something that adds value to their home and for people with teenage kids, pools are great,” Jillings says.
It seems Bunnings, Mitre 10 and Hire a Hubby like tradie businesses are going to be big beneficiaries in the renovation market post Covid 19 with international travel possibly off the agenda (outside Australia) for a year or so.