I have been surprised at the somewhat negative media commentary on property in the last 90 days, with prominence given to the usual doomsayer economists predicting a market meltdown. With predictions of 10–20% price drops (and a few keyboard warriors during lockdown saying the market could fall up to 50%), it seemed we were in for something between a right meltdown and total systemic failure in housing markets.

For many of them, it’s all still just around the corner when the wage subsidies run out and mortgage holidays end. In reply to this, I can’t see it happening (all things being equal). In fact, I think house prices are just as likely to go up this year.

I do wonder if it would be better for economists to spend a bit of time with actual investors and homeowners, or maybe a mortgage broker and property adviser, rather than their statistics and academic colleagues. A bit of feedback from the street would be helpful - for example, insight into the stimulus caused by rapidly falling interest rates and the resulting demand.

While the doomsayers see falling prices, investors are actually thinking they would enjoy buying houses at a 10-50% discount, to then benefit from a recovery in prices (two sides of the same coin). Especially with bank lending becoming so cheap, and thin pickings in alternative investments such as the stock market or bank interest.

So, I don’t see the crash in housing values happening this year, and neither do my clients it seems. In a webinar poll I ran during lockdown, 94% of circa 1,200 attendees said they intended to buy another rental investment in the short term.

‘Every real estate agent I speak to in New Zealand (apart from Queenstown agents) tells me there is a miniboom on, driven by the historic low in interest rates’

(Remember this was at the height of the angst.) Every real estate agent I speak to in New Zealand (apart from Queenstown agents) tells me there is a mini-boom on, driven by the historic low in interest rates and resulting cashflow windfall to investors and homeowners, amongst other things.

Pretty obvious to property investors, but not the economists and regular property haters, apparently.

Market Impact

As I see it, there has not been any significant residential housing market impact in Auckland from Covid-19 in July 2020, nor in most of the markets I deal in across New Zealand. Queenstown might be the exception – I feel for investors down there suffering from soft rental demand and job losses, but Queenstown has always been a bit of a boom-bust town. I will be monitoring developments with interest, particularly once the second bout of the wage subsidies expires, but my view is that when someone loses their job, they still need a place to live. They either move cities for work, or the government assists with social housing. But there are still the same number of people needing housing, so core demand is unchanged.

With interest rates in the twos; a liquid and supportive banking environment; a government active in helping those in need and providing social housing; lots of jobs (despite 9% unemployment, many employers are reporting they can’t get staff); and thousands of expats returning from overseas every day; I just can’t see distress in the residential property market (with the exception of Queenstown).

Even if you are forced to sell, you are selling into a hot market so should get a good price. Alternatively, a distressed vendor can retain their home and rent to tenants, which would likely produce positive cash flow, given the current low interest rates. So where is this impending meltdown? Show it to me – like others I would really like to buy some cheap houses and rent them out; the cashflow is fantastic at present. But get in line, it seems most of New Zealand is thinking the same. If you’d like to know more about property investment strategies for the current market, I invite you to watch my Property Investment & Education Seminar, available online. This includes a Covid-19 update: www.gra.co.nz/events/propertyinvestment- seminars.