Westpac NZ slashes forecasts for house price growth and GDP as coronavirus starts to hit jobs and consumer spending

Westpac NZ slashes forecasts for house price growth and GDP as coronavirus starts to hit jobs and consumer spending

Westpac New Zealand's chief economist is expecting the housing market to skid to a halt as the effects of coronavirus start to bite.

In a just released report on the economic impact of the disease, Westpac chief economist Dominick Stephens said the main impact of the virus would be felt in the second quarter of this year.

"The currently rampant housing market is likely to skid to a halt, with price growth slowing sharply in the June quarter," he said.

And a slower housing market would have a flow-on effect on consumer confidence and spending.

"That, combined with job losses and lower farm and business incomes, will have a secondary impact on consumer spending that could last longer than the immediate disruption of the virus," Stephens warned.

Westpac is now forecasting a 28% drop in visitor arrivals to NZ, and has reduced its March quarter Gross Domestic Product (GDP) forecast to -0.2% and its forecast annual GDP growth to 1.9%.

"Without coronavirus and drought our annual GDP growth forecast would have been 2.7%," he said.

Stephens also reconfirmed his earlier forecast that the Reserve Bank would cut the Official Cash Rate by 25 basis points (to 0.75% from 1.0%) at its next review on March 25, but added that he now also expects another 25 basis points cut in May.

The good news was that Stephens expects the economic impact of coronavirus to be relatively short-lived and the economy to recover quite strongly afterwards.

"It is important to remember, though, that this is a temporary disruption to economic activity, not a new long-run trajectory for the economy," he said.

"We anticipate a period of above normal GDP growth after the worst of the virus-related disruptions have passed, as the economy returns to a normal level of economic activity, catch-up production to restore depleted inventories occurs, and even lower interest rates stimulate asset prices."

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200 Comments

With Chinese economic engine restarting in early April and on full throttle in June, NZ's primary sector should be fine.

NZ's risks concentrate on services sector with confirmed case over 1000 by June.

29
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After your comments yesterday, which were inconsistent with the CCP narrative, I'm surprised you're still alive.

19
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He's been replaced by a bot. Not that anyone would notice the difference.

Comrade Xi is pulling on that economic engines starter cord, but it is just spluttering. Fouled plugs I suspect.

Remind me to buy a car in the 2nd quarter of the year: prices should fall!

TTP

TTP.....I hope for your sake you have at least 80% equity in your properties ....as if car prices fall, it means businesses are slowing down and the cash stops circulating, people (your tenants) will find themselves out of a job ....then how will they pay your rents ???

Got rid of all my debt August last year ....so no bank can come knocking on my door asking for monies owing.... plenty of room in the backyard for a large vege garden too.

Anyway, you have absolutely nothing to worry about, because as you say, you are always "to the point" ....have a lovely weekend :)

Yes you're right CH to deleverage. I sold off my last rental property to clear all my mortgage debts too, Such a nice feeling not to worry over a mortgage. And certainly go for it for the veg garden, it's very relaxing and rewarding. Would also recommend the "No Dig" gardening approach much easier.

Yes CJ099 ...I just didn't realise how "freeing" it is, not to owe the bank any money.....and your salary goes way further too.

Just ridiculous the amount of money that is being paid for rents and mortgages in Auckland, let alone the property purchase price !....the sooner you can get out of the banks grip, the better.

Well, better get to the garden centre for those vege seeds !

Hi Crazy,

What makes you think I own any property at all?

Where's your evidence?

TTP

...ahh your a real estate agent then ! :)

nah, he was infected by the virus which was brought to PN, and he's getting delusional

.

There will be a few sitting at the airport with thier keys in them.

And a leaky propaganda engine.

Tourism will be hard hit, and to a certain extent entertainment and hospitality

Businesses are already asking help, and there will be plenty of people out of work.

https://www.stuff.co.nz/business/industries/120058636/as-coronavirus-num...

Potentially 300 jobs in the logging sector

https://www.newshub.co.nz/home/rural/2020/03/gisborne-residents-plead-fo...

And this highlights the mental toll it can take on families - "... he heard stories of people who now feel suicidal."

How long can those with loss of incomes, large mortgages and high debt service ratios (mortgage payment / household income) continue paying the mortgage? With a loss of income, some households are likely to come under financial stress.

If they choose to list their property for sale, then that adds to the potential number of properties listed for sale in the area, (and hence effective supply). This is how property markets go from a seller's market to a buyer's market.

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I'm sure they'll be fine. After all, no one would be irresponsible enough to have a mortgage without also having 6 months living expenses set aside as an emergency fund. Even if this thing does drag on a bit longer than 6 months everyone should manage alright given that they haven't borrowed more than 3x their income since leverage can be a double edged sword should prices ever drop.

Nice sarc

What do people think about assistance? Is it fair enough because it's an 'act of God'?
Those of us working in the urban development space didn't see any assistance dished out when the GFC struck. Should it be any different if it's a natural versus man made crisis?

Do you know who gets assistance? Those who ask, which is not necessarily those who need it. When the government offers assistance there is always some very willing to put their hands out

Yeah, and its' often the usual suspects.

Hey, we do agree on a few things ; )

Bleedin' communists!

1000 by June???
Yeah try one month. Take a look at how many countries doubled confirmed infections over night, 15 by my count and a hell of a lot more at 1/3 higher. These viruses start at a slow rate and ramp up slowly then skyrocket from there on.
We hit skyrocket today.
For NZ it dosen't really matter if China starts again we will be in lock down before the month is out due to the flu season being here now (in Dunedin anyway).

It is not a skyrocket. A CRL at best.

It's been confirmed that somebody with the china virus was at the Tool concert last Friday.

Expect plenty more cases in a week or two.

China is grinding to a halt. Big Wuhan virus outbreak in Guangzhou happening now. Expect a lock-down there in the near future.

Hi Xingmowang, Does it mean that you have information that corona Virus issue will be solved by end of march and from early April everything will be back to normal.

starting to get back to normal in early Apirl for China ONLY.

yes. I am certain.

thanks Yoda

You heard it first on the mo show!

It's all part of the Glorious Five Year Plan. Of course we shouldn't worry. QED (should that be "Quantitive Easing Disaster"?)

U think?
Potential FHBs are calling their parents re the spare bedroom as we type. Renters too.

18
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Wife: "Honey, its a beautiful Friday, we should do something"
Me: "Interest.co.nz just published an article saying NZ property prices won't keep going up!"
Wife: "Forget everything I said. I'll get the popcorn"

Wife. Sit with the unwaahes masses in close confinement.

Check out all the economic incels getting arroused at the prospect of others misfortunes. Literally the lowest of the low. It will all pass and we will be fine, you however will always wake up in your parents spare room

20
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The people who were continually crowing about house prices going up were also effectively crowing about the misfortunes of others. For those people, a situation in which large numbers of people were living in substandard accommodation that in a number of cases impacted their health and paying extortionate rent was great. A situation where in order to buy a house people had to move away from friends and family (often tearing kids away from grandparents and other extended family) was great. A situation where people had to move so far from work that they'd have to leave before the kids got up and would be lucky to get home before they went to bed was great. These people didn't matter so long as those who owned property kept getting their tax free capital gains.

17
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Thank god other people can see the utter selfish greed of these leeches who pray for house price increases and completely ignore the suffering of others who were not fortunate enough to be born earlier.

Good post in response. Been one way traffic on the "I'm so great" specuvestor crowd for a while. Asset pricing and debt levels are a blight on all of NZ. It's been poised for a fall for some time and global policy has fought hard protected the house of cards (print print print). All those that bought into the debt jenga of interest only, leverage is golden, they aren't making any more blah blah are perhaps finally awakening to the fact that they merely front run most of the risk for the banks profits. Cap gain is only a win when you actually bank it, just like stocks. All investment has a downside risk.

If half the potential asset declines transpire, specuvestors better stock up on pepto pills. I hear toilet paper is already in short supply due to recent crazy purchasing, kind remind you of anything else in a way.

Bring on the reset.

But but but house prices have only gone up over the last 50 years. Just like Christchurch didn't have a severe earthquake 50 years prior to September 2010/Februray 2011.

Not being able to own your own home should not be misfortune. Renting should be absolutely tenable as a lifestyle, and renters should be able to grow their wealth in other ways. Hundreds of millions of people around the world in majority tenant countries have far better standards of living than typical Kiwis without ever owning a home. Tenancy reform (including protections for both tenants and landlords) should, theoretically, help tremendously with the housing crisis. You just know NZ won’t be able to pull it off, though. Many renters simply won’t have the discipline to save and invest their excess funds (say what you like but renting IS cheaper than owning - that’s where negative gearing comes from), and will not treat the homes they rent well enough to convince landlords to give them a secure tenure.

I don’t own any investment properties any more so I don’t really have a dog in this fight. However, I was always happy to provide longer term leases to good tenants with CPI rent increases and a market review every few years. I never left a repair unattended for more than a day or two. Then a tenant (upper middle class) absolutely wrecked a home of mine with meth contamination. Now we have one less landlord willing to do the right thing. Good job, team.

My God. It seems like some people just can't bear to have it pointed out that high housing prices have been the cause of a lot of misery for a lot of people without yet again trying to refocus the conversation on bashing renters yet again.

13
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Annual GDP growth of 1.9%? Yeah right.
What planet are these guys on?
Will do well to scrape past 1%

Yep arround 0.5% if China manages to start up.
Woops new info coming out that other Chinese cities getting smashed now.

If only Westpac’s chief economist had bothered to ask you first. Perhaps next quarter they’ll switch to “what some guy on the internet said” modelling. You live and learn eh.

On the bright side, NZ’s economy is small enough and there’s enough cash in the government’s chest that fiscal stimulus alone could be used to grow GDP by a couple of percentage points without breaking the bank.

Do you work for them? You seem quite defensive of an organisation that have been pretty poor in their forecasting record.

The outlook has certainly changed over the past month.
I feel that there is still a lot of uncertainty as to the extent of both the virus and economic impact on NZ - especially as it becomes transmitted among those who haven't traveled overseas (1 to date) and the onset of the winter and cold/flu season. My guess; containment is unlikely to be realistic, so actions will be about minimisation.
Barfoot auction results will provide the most immediate indicator (note "indicator") of the extent of buyer reaction and consequent impact on prices and turnover.

Update: Just read that one of the NZ four with Convid-19 was at a rock concert - clearly containment is going to be so difficult and at best we will need to focus on minimisation.

The Tool gig had people flying in from all over the country to attend. I'm guessing we'll find out if he was infectious or not in short order.

"It is important to remember, though, that this is a temporary disruption to economic activity, not a new long-run trajectory for the economy"

Just so you all know (Bob Marley playing in the background [not Redemeption Song, the more cheery ones])

That comment is nothing more than wishful thinking. Nobody knows nothing.

"this is a temporary disruption to economic activity, not a new long-run trajectory for the economy"

Regardless of the economists GDP forecasts, the issue is that if the disruption goes on for a few months, real businesses run out of cash. Businesses have to cut costs, and cut staff to survive.

How many businesses can sustain a period of 6 months without any revenue, and still pay their existing level of expenses? Very few have cash balances to sustain that.

1) Without cashflow, some of these businesses go bankrupt.
2) Without cashflow, some of these unemployed staff are unable to keep making their mortgage payments, and may be forced to sell their homes.

So if you have good job security it's probably a good year for First home buyers to buy especially when interest rates drop further

Cashing in the shrinking KS balance or the collapsed share portfolio right now is going to feel painful. Probably much better to keep it intact and ask the parents to tide over the deposit. What do you think

Be careful not to catch a falling knife.

And be careful of analysis paralysis.
It's impossible to know exactly where the bottom will be. If I were a FHB right now I'd be holding off buying for a few weeks but would be on the lookout for sharp deals in April.

I agree.
I bought my first home late last year, I think it was pretty good timing, especially as I think I got it for a fairly sharp price.
I am on floating, will probably fix once we see rates drop away.

Stephens also reconfirmed his earlier forecast that the Reserve Bank would cut the Official Cash Rate by 25 basis points (to 0.75% from 1.0%) at its next review on March 25, but added that he now also expects another 25 basis points cut in May.

Great, the RBNZ will have cut interest rates in half four times since the middle of 2008 if the above prognosis becomes reality .

Will banks absorb potential, dominant residential mortgage asset mark downs if the housing market collapses and redirect credit extension to the more capital intensive productive sector, to underpin wages and GDP qualifying output?

I doubt it if history is a precursor of the future. Banks will only seek to fund collateralised high credit rated endeavours proposed by the already wealthy minority. The very reason enough is never enough when it comes to lower interest rates.

28
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Hi,

Such doomy gloomy forecasts should be banned from this website, so that us sophisticated spruiker experts can continue our circlejerk... I mean, very intelligent conversation. This is a safe space for property bulls(hit)!

TTPee

CJ
Neither a considered nor constructive comment.
No doubt you will classify me as a "spruiker: as I have commented in a positively and substantiated way about property - 2019 was about no bubble burst, market bottoming out, indicators of upturn late in the year.
That was about commenting (correctly) on the direction of the market.
Where to because of the virus? I am waiting a few weeks to see the extent both of the virus and its impact on property (such as Barfoots auction results which will be the most immediate indicator data).
Oh, and 2016 I was posting that prices were not sustainable and Oct 2016 that there were indicators of the Auckland market was peaking so have not always talked the market up.
During this time there has been so, so many unconsidered and unsubstantiated comments such as yours. Lets see you put a little more thought go into things rather than continuing.

21
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Chill mate, just taking a jab at TTP who was constantly advocating for bearish commenters to be banned from this site so that he and his bullish friends can have "conversations" in an echo chamber. He also called "DGM's" morons and idiots and the like. Oh, and that was when we were posting our considered opinions, reasoning about why we think this is a bubble etc.

For the "thinking commentator " why would Barfoots auctions provide an indicator in the coming months, if as you state( guess) the virus will not be contained on New Zealand shores.

Cowpat
You have a very short memory. Barfoots data was an early indication of the upswing last year despite you rubbishing it as being so.

Printer8, if as expected WHO calls this current event a pandemic, any "thinking commentator" would appreciate that auctions will be a very rare event in the coming months.
Further, by Cowpat | 19th Oct 19, 1:20pm
"Auctions remain a significant indicator of the underlying strength /weakness of the housing market , and provide a timely indicator of housing sales volumes, given its relationship with the flow of listings .Sales volumes remain extremely weak , on a historical basis , but particularly so given the current financial settings ." and further

by printer8 | 8th Oct 19, 4:20pm
"Hi Cowpat Yes, you will note that I have posted on a number of occasions - such as the one you identify - that auction data in itself is not a firm indicator as it is largely influenced by what is the preferred marketing option depending on the state of the market, so raw auction data which only represents fraction of the sales is not an accurate reflection of the state of the market."
Who believes auctions are an important indicator ?

Its already a pandemic, I think all efforts in germany, france italy, south korea and usa are close to futile

10
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You've made the choice to be offended there mate. Clearly directed at someone in particular.

That’s the second time this week I’ve heard the term circlejerk! Hilarious!

Did he have another stab at house price inflation or did he chicken out?

Given the current uncertainties of the extent of the virus in NZ, I think that most thinking commentators would be apprehensive as anything would be a guess.

10
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"...anything would be a guess." Same as usual then?

Didn't stop him guessing GDP did it?????

Flat line in bank talk ='s negitive 10% to start with and the tough times aren't on us yet.
I'm still calling -20%.

Hi All,
I am currently thinking of selling my current property as the market is hot (not sure still a good idea).
Following is(was) the plan any ways.
- 13th April, on the market
- 3rd May auction
- Purchase June/July
- Settlement August
I think that market is hot right now (OCR cuts), and soon in winter market is going to drop (winter, elections)
Thoughts please?

Cheers

Auction asap. 2 weeks lead in and then off it goes.
Stay out of the market for a bit and rent. Buy at the low.
Guessing you have missed it though.

11
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Get it on the market ASAP if you want to sell.. you can always just say no and stay put till next year if you don't get a decent offer. Open homes once covid-19 is widespread will be about as popular as a long haul economy flight.

I agree mate, if we go with the current plan, we always can say no. If the reserve does not meet.

Do you really want to have to move in the midst of a pandemic? Where will you go? I guess if you are young and healthy not an issue, just remember not to take it back to your parents or grandparents.

17
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You might already have missed this year's peak. Put it on the market ASAP if you really need to sell. I wouldn't wait until April. But I'm what many would call a DGM, so take this with a grain of salt.

You're too late

Markets have a habit of overshooting and then undershooting, my feeling is you have missed the last peak, short as it was, but if you are after fair value, you will sell. Buying low and selling high for houses, is not as easy as it seems.

Did not know it takes an agent more than a month to get a property open home ready.

I agree, decent agent should be able to get it on the market in a week. But that's based on overseas experience. I despair of agents here. Paid the earth and can't even seem to tell you what the home is worth.

It's probably not the agent that needs 1 month it's the vendor who needs this time to "tidy the house" to make it more presentable, fix this and that, repaint here and there, make the gardens look tidy maybe replace some drapes, an old built-in appliance, a worn carpet etc...

Long settlement, what if the buyer gets Corona and kicks the bucket?

26
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I don't understand... Numerous commenters on this very site have told me the only way property prices can go is up.

If there is suddenly a huge spike in new listings the buyers are going to smell a rat and expect a bargain.

Can you name one, Taubin?

11
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ha ha ha, ironic

If you're thinking of me, not really. I admit saying that RE goes up in the long term and is an great investment if done right, I have also said that timing the market is a losers game and that FHB should buy their own home as soon as they can without overstretching themselves, but I have never said the RE can never dip, that's silly, it did drop, modestly, in 2008

10
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I have never heard you say that

Thanks Fritz, nor have I heard TTP, TM2 or Printer8 ever say "house prices can never go down" so I repeat my question to Taubin: "can you name one?"

You are changing your narrative a bit now

How? Taubin said (quote): "Numerous commenters on this very site have told me the only way property prices can go is up" I replied name one, I don't think TTP, TM2 Printer8 or I have ever said that.
How am I "changing my narrative"

You seem to be raising the possibility of price falls when you have never really done so. To date, you have been super bullish, and have openly supported Westpac's predictions for this year, and you have predicted the market will hit a new high in March.

I can't see the contradiction, yes in Sept 2019 I predicted house prices to reach new highs in March 2020. That does NOT mean I said or think that "the only way property prices can go is up" to quote Taubin

11
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come on man. You are changing the narrative. You may not ever have said property prices 'can't come down', but the possibility that they could fall has never been part of your narrative.
It seems convenient for it to be part of your narrative now.

So you and Taubin agree that I have never said that house prices could never go down?

"the only way property prices can go is up"

Just as a reminder these are some reasons given in the mainstream media, property market commentators, property market promoters, bank lending promoters masking as bank economists, real estate agents, property market mentors & other sources as to why property prices in Auckland will not fall by much and that there is a low probability that property prices will fall dramatically:
1) during the GFC, house prices in Auckland fell only 7-10%
2) over the past 50 years, house prices in Auckland have averaged 7.2% per annum (or commonly referred to as house prices doubling every 10 years). This trend can be expected to continue into the future - https://youtu.be/Agp9xFWoBX4?t=172
3) there is a shortage of underlying housing in Auckland, so property prices won't fall by much - https://www.interest.co.nz/property/97513/auckland-councils-chief-econom...
4) there is a growing population which means that there will be more demand for houses - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
5) we have inward immigration which means more demand for houses
6) Auckland is an attractive city with an attractive lifestyle - that makes it desirable and attracts foreigners to move to Auckland and hence raise the demand for houses
7) lower interest rates are supportive of rising house prices
8) lower interest rates make debt servicing easier for borrowers
9) Low interest rates were also forcing retirees and those nearing retirement to look for investments that would produce income, such as rental property. "Plans of the baby boomers to retire and live off a conservative yet well-yielding portfolio have evaporated with low interest rates," he said. "[They] are seeking assets and buying investment properties. They are also seeking assets they can hold and live off of for three decades in retirement rather than just 15 years given advances in health and medicines." - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
10) we mustn't forget either the vested interests in ongoing stability. No government, central bank or trading bank with mortgage exposure wants materially lower house prices. Nor does an incumbent Beehive want falling house prices going into an election campaign https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
11) the economy is doing well, with low unemployment - https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
12) there has been insufficient construction of new builds to meet the housing shortage - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
13) there are high construction costs to building a house. House prices cannot fall below their construction cost. - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
14) people don't sell their houses at a loss - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
15) continued inflation means that house prices will continue to rise in the future
16) The fact is, debt levels have barely changed from the beginning to the end of those 10 years, compared to GDP levels, compared to household assets, compared to household disposable incomes. And much more importantly, debt servicing is very much easier now, an item that is almost universally overlooked. We are not pushing out to unsustainable levels now, and even if they creep up a little, we are far from that point. https://www.interest.co.nz/opinion/95894/if-you-think-new-zealands-house...
17) in aggregate household debt servicing is low in New Zealand - currently at just under 8% of disposable income of households - https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
18) property market participants & commentators who have been correct in their predictions about recent property price trends have more credibility and hence their predictions of upward prices are believed by a wider audience (such as Ashley Church, Tony Alexander, Ron Hoy Fong, Matthew Gilligan, etc). - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
19) previous warnings about a house price crash have been wrong - property prices have continued rising upward significantly since these warnings were given, so there is little reason to believe these warnings.(such as Bernard Hickey) - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
20) its unlikely Auckland prices collapse. I think the main two reasons though are:a) Affordability has been this bad, and worse, in the past and it only resulted in about a 10% drop. b) The number of homes built over the last decade has been too low and will take some time to recover - https://www.interest.co.nz/property/100670/housing-market-continues-hibe...

There's some valid points in there, but there are also a few logical fallacies.

Property price optimists are so focused on those reasons, that many are unaware that they're overlooking a more critical point. Many are unaware of the importance of the critical point.

Property price bears are aware of the critical point.

What about doing property for the love of it, as an investor I love buildings and properties more and more over time. Weve had difficult stressful properties and tenants but not enough to make me hate the industry. I dont think that will ever happen.

Glad to hear that you are doing property for the love of it.

Curious to know, would you still love doing property, if your property projects were all loss making?

As a wise man once said, do people love the business or do they love the money?

When I was younger I heard that if you do what you love you will never have to work. So this sunday morning getting up before 6am is not a drag I enjoy hearing from builder Peter Wolfcamp on zb

Well constructed summation CN I agree

Of course you would!

Yes of course if I agree with something I say so. Whereas the DGM crowd are always spinning the facts. In December you '"bought a house" and have been sending mixed messages since

You seem to agree with anything that suits your spruiking narrative.
Some others here go the opposite way, with doomster scenarios, which are just as non-credible.

Both positions demonstrate confirmation bias.

The truth is highly likely to be in between.

Mixed messages? Why?

From late last year, when I bought, I said prices would be flattish this year, maybe uptick a little bit.
I have been saying for a long time that in or before 2022 there will be an economic shock, and prices are likely to drop significantly. That doesn't worry me, my house is for the long term and I had a pretty decent deposit.

As I have said in recent days, I think it's quite a good time for first home buyers to buy, especially if their jobs are not in the tourism and hospitality sectors.

Houseworks, I am confident that most of my predictions over the last year or two are close to being on the money.

All I said was that it was a well written summation by CN and I happen to agree with it. So that does not amount to spruiking or anything of the kind... Get over your ego mate.
Last year you absolutely were not happy in your rental with poor internet and a landlord you didnt like. Now you bought a house you are still not happy. Pouring cold water on westpac predictions and attacking others who disagree with you that they are spokespeople. Also wishing and hoping for terrible corona outcomes. Are you hoping you can snap up a bargain investment property or something. As for your accuracy, last year you were claiming the market would fall badly. Even Auckland come the end of the year didnt and as for the rest of NZ it pretty much steamed on. So hows that accurate Fritz? Any predictions you wish to highlight that could restore your record.

No need to get wound up, you really are an angry man. My response was calm, considered and factual.
I am very happy. I just want to keep ensuring the debate is balanced. Because so much of the media aligns with your view that property is a one way bet.
I have a lot of sympathy for those struggling to get on the housing ladder. It would be very sad if people get caught out by only listening to and believing one side.

By the way I will correct your inaccurate summary of what I have said. I said Auckland would fall from peak by 5-10%. It fell about 5%.
Then I said it would be flattish this year.
But that it would fall 10-20% sometime in 2021-2022.
You can come back in 2022 and tell me if I am wrong on that one.

"Auckland would fall 10-20% sometime in 2021-2022." You sure give yourself ample range for getting it a little right, A range of +/- 10% and 2 years Jan 21to Dec 22, hardly a brave prediction

Nice summary, CN. I do like it when people reference their points and take the time to build a credible argument. Where I'm at at the moment could best be described as "I don't know." The issue for me is in knowing that *other* housing markets that seemed very solid have also 'inexplicably' imploded, sometimes spectacularly, and after the fact everyone says, "It was so obvious! Why didn't we see it?" With respect to some of your points, I'm not 100% convinced; for example:

2) *Other* markets have also touted 'house prices double every ten years', because that's what's happened in the past. But then a correction comes and the people who bought at or near the peak did NOT see those purchases double within the next ten years. Even though history would have indicated that to be the likely case.

4 + 5) Growing population—I find this quite compelling, and a good indicator for the long run in AKL. But...*other* markets have also seen significant population growth, and still crashed. Immigrants declined, those immigrating increasingly sat on the fence and rented when the market was at the peak. And there is also that situation with lots of building. "There's a shortage, build build build!" Then the consents got issued, heaps of homes got built, the market caught a cold, the building continued, and vacant new builds on the market dragged prices down for everyone.

6) Yep AKL is lovely, but California had a gigantic bust, and that's a super hot destination from a global perspective, so I don't think this one stands on its own...

7, 8, 9, 10) All these are encouraging for long-term investment into the market, yep.

11) Umm yeh...but things don't necessarily stay that way forever. Tourism and dairy are in the shitter right now, our #1 and 2 export earners.

13) New builds can literally drag home prices down. *Other* markets have seen new builds bull-dozed (no-one ever lived in them) because the cost for the builder to hold was too high (squatters and maintenance, but primarily property taxes). Not saying that will happen here, but I've personally bought and sold new homes that were priced at or below their construction cost. USD120k for a 1800sf brand new 3 bed. So this is a possibility, although not a very high one, I'd say.

14) Well yes, sometimes they do. That's what happens in negative equity. Hard to believe and even harder to stomach. All it takes is for a few desperate sellers to take this step and the price bar is reset to that level.

I do think there's a shortage of affordable housing in Auckland though...I'm just not entirely convinced that's enough to sustain ongoing rises or preclude a correction, which removes the FOMO from the picture a bit. I'll be watching the Covid-19 impact play out and then revisit things.

"The issue for me is in knowing that *other* housing markets that seemed very solid have also 'inexplicably' imploded, sometimes spectacularly, and after the fact everyone says, "It was so obvious! Why didn't we see it?"

Your global experience has made you aware of how house prices can fall, and in some instances dramatically. it sounds like you have financially benefited from those price falls. Many in New Zealand do not have the benefit of your experiences in "other" markets. Since they don't have that experience, they are more likely to accept the rationalisations by the main stream media and property promoters without question.

"All it takes is for a few desperate sellers to take this step and the price bar is reset to that level."

You have raised an important point. The question is, are there a sufficiently large number of vulnerable property owners who could become potentially desperate sellers under certain conditions (e.g a recession, a credit crunch)?

That's the thing when asset prices get into speculative levels, the people who get caught up in them, are unaware that they're getting caught up in it. Some examples of recent asset price bubbles:
1) Bitcoin and other internet coin offerings
2) venture capital - e.g WeWorks
3) shares in marijuana companies in the US.

For those trained correctly, they can be easily identified. The lessons are there to be learned from history. One of the lessons learned from history is that people do not learn from history. The next generation of people learn the same lessons learned by previous generations. Those that do not learn the lessons from history are doomed to repeat them.

Economists focus on the supply from a primary market perspective (i.e new houses being built to meet underlying demand). They focus on underlying demand and underlying supply for housing and not effective demand and effective supply for housing. This is how they can get caught out with respect to their property price forecasts.

However, anyone who understands prices in any free market realises that prices are set at the margin and these can be largely determined in the secondary market - i.e by the marginal buyer and marginal seller of an existing house. This is the effective supply and effective demand in the property market.

If there is a desperate, time constrained marginal seller, and the seller is willing to accept a lower price from the buyer, then this becomes the new market price.

Now imagine that there are economic conditions which result in a large number of desperate, time constrained or financially stressed highly leveraged property owners. And as prices trend downwards (and this is more commonly reported in the mainstream media), potential buyers extrapolate this downward price trend and have changed future price expectations - they then decide to wait for lower prices before buying - this results in fewer buyers at current price levels. If you recall, when property prices were rising rapidly, buyers extrapolated this price trend to determine their future price expectations and there was a fear of missing out, and hence the rush to buy.

That is how free markets can result in a supply / demand imbalance with price being the variable that changes and brings effective supply and effective demand back into equilibrium ...

Experience out of Hong Kong with time constrained or desperate sellers

https://www.scmp.com/business/article/3064763/hongkongers-are-selling-th...

"...US$1.5 million in losses"
Do we make the assumption that the seller made a loss OR that is the difference from what could have been.
Eg missed selling for $10m last year, sold for $8.5m this yr

Those are realised losses (i.e sales price less selling costs compared to the purchase price). And remember this also excludes the impact of the use of leverage.

"Another example is a flat measuring 986-sq ft that comes with a 825-sq ft garden at The Mediterranean in Sai Kung, which was sold for HK$17 million early last month, a loss of about HK$1.9 million including taxes and expenses. The owner paid HK$18.05 million for the unit in April 2016, according to property records."

Debunks point 14 in the list above that owners don't sell at a loss.

Also FYI, Hong Kong also has:
1) an underlying housing shortage, (debunks point 3 above)
2) a growing population, (debunks point 4 above) and
3) there is inflation (debunks point 15 above)

Yet doesn't economic theory say that housing prices should be rising under those conditions? But in reality, people are selling at prices lower than the price which they paid when they purchased the property.

Owner occupiers can choose to continue using misinterpreted economic theory (and believe the property market promoters who have a vested financial interest), or commercial reality. That is their choice.

A reminder of some mathematics done last year.

Many property investors are extrapolating historical property price changes into the future. Historically prices have increased 9.9% per annum since 1965. Many property investors believe that prices will continue to double every 10 years. Is this price increase sustainable?
Let's assume that there is no hyperinflation in NZ, like Germany experienced in the 1930's, Zimbabwe experienced in 2000's, and the current situation in Venezuela. For hyperinflation to occur in New Zealand, would mean for the RBNZ to abandon it's 1-3% inflation target, and focus on different macro-economic metrics - that seems like a low probability scenario given the current environment & legislation in New Zealand.
So with a low inflation economic backdrop, let's assume property prices in Auckland double every 10 years (that means house prices grow at 7.2% per annum). Let's extrapolate what house prices have done in the past 52 years, and extend that into the future - what does the future look like for Auckland house prices?
(Here are some of the other underlying assumptions - rents in Auckland grow 5% per year, household incomes in Auckland grow 3% per year)
You can pick at which point that Auckland house prices might start to seem a little ridiculous to you.

In the year 2019 (today) -
Median house price in Auckland - $0.850mn
Median gross rental yields in Auckland 3.51%
Price to rent ratio 28.5x
Median house price to median household income ratio 8.9x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 1.8x
Equity deposit of 20% required to buy: $0.17mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 41.3%
Median rent cost for renters as % of median household income 31.3%

In the year 2029 (10 years from today) -
Median house price in Auckland - $1.7mn
Median gross rental yields in Auckland 2.86%
Price to rent ratio 35.0x
Median house price to median household income ratio 13.3x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 2.7x
Equity deposit of 20% required to buy: $0.34mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 61.5%
Median rent cost for renters as % of median household income 38.0%

In the year 2039 (20 years from today) -
Median house price in Auckland - $3.4mn
Median gross rental yields in Auckland 2.33%
Price to rent ratio 43.0x
Median house price to median household income ratio 19.8x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 4.0x
Equity deposit of 20% required to buy: $0.68mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 91.5%
Median rent cost for renters as % of median household income 46.0%

In the year 2049 (30 years from today) -
Median house price in Auckland - $6.8mn
Median gross rental yields in Auckland 1.89%
Price to rent ratio 52.8x
Median house price to median household income ratio 29.4x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 5.9x
Equity deposit of 20% required to buy: $1.36mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 136.2% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 55.8%

In the year 2059 (40 years from today) -
Median house price in Auckland - $13.6mn
Median gross rental yields in Auckland 1.54%
Price to rent ratio 64.8x
Median house price to median household income ratio 43.8x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 8.8x
Equity deposit of 20% required to buy: $2.7mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 202.7% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 67.6%

In the year 2069 (50 years from today) -
Median house price in Auckland - $27.2mn
Median gross rental yields in Auckland 1.26%
Price to rent ratio 79.6x
Median house price to median household income ratio: 65.2x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 13.0x
Equity deposit of 20% required to buy: $5.4mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 301.7% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income: 82.0%

In the year 2079 (60 years from today) -
Median house price in Auckland - $54.4mn
Median gross rental yields in Auckland 1.02%
Price to rent ratio 97.7x
Median house price to median household income ratio 97.1x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 19.4x
Equity deposit of 20% required to buy: $10.88mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 449.0% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 99.3%

In the year 2089 (70 years from today) -
Median house price in Auckland - $108.8mn
Median gross rental yields in Auckland 0.83%
Price to rent ratio 120.0x
Median house price to median household income ratio 144.4x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 28.9x
Equity deposit of 20% required to buy: $21.7mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 668.2% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 120.4% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2099 (80 years from today) -
Median house price in Auckland - $217.6mn
Median gross rental yields in Auckland 0.68%
Price to rent ratio 147.3x
Median house price to median household income ratio 215.0x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 43.0x
Equity deposit of 20% required to buy: $43.5mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 994.5% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 145.9% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2109 (90 years from today) -
Median house price in Auckland - $435.2mn
Median gross rental yields in Auckland 0.55%
Price to rent ratio 180.8x
Median house price to median household income ratio 319.9x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 64.0x
Equity deposit of 20% required to buy: $87.0mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 1479.9% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 176.9% (renters have to pay more than their entire household income to rent a house as accommodation)

In the year 2119 (100 years from today) -
Median house price in Auckland - $870.4mn
Median gross rental yields in Auckland 0.45%
Price to rent ratio 222.0x
Median house price to median household income ratio 476.1x (purchase cost for owner occupiers)
Equity deposit of 20% required (multiple of median annual gross household income to be saved as deposit): 95.2x
Equity deposit of 20% required to buy: $174.1mn
P&I mortgage pmt (@ 4% int rate, 30 years) as % of median household income: 2202.4% (i.e have to pay more than entire median household income as mortgage payment)
Median rent cost for renters as % of median household income 214.4% (renters have to pay more than their entire household income to rent a house as accommodation)

Yes seems like not possible. When in the 90s I told my friends that olly newland predicted 1 million dollar auckland homes they said he was crazy. Thankfully I ignored their advice.

Interesting that Dominick seems to think he can predict the medium term economic impacts, given that no one really knows how well we will be able to contain the spread of the virus.

From listening to epidemiologists the range of possible outcomes varies hugely, but there seems to be a growing consensus this will be a pandemic situation. To confidently say this will only have a short term impact seems somewhat foolish at this point.

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Its already a pandemic the WHO have been totally incompetent in their handling of this from the get go.

For those that say they have no mortgage owing on their home, I would suggest that you are not investing very wisely.
Unused equity sitting idle is just a plain waste of your ability to live a far better lifestyle!
However, there are always professional successful investors and some that are not successful.
Now is the time to be buying property providing you have bought well and positively geared

"providing you have bought well"

Most first home owners and owner occupiers do not know how to buy well. Most buy at the prevailing market price.

When things get tight, unless its a deceased estate, or a marriage split, there is only rubbish on the market. Good properties, ones with specific attributes, like sun , shelter, access to public transport, low maintenance, do not come up for sale, as the owners know they cant do better and ride out the storm in comfort.

There is an assumption that owners are able to ride out the storm.

Owners may be highly leveraged and unable to ride out the storm.

For example look at those who have lost their incomes such as those in the tourism industry, or logging industry.

Good point, but sellers usually sell to buy a more expensive house, and incur more debt, its these sellers who hold back

"sellers usually sell to buy a more expensive house, and incur more debt, its these sellers who hold back"

Got you. The owner occupiers who are potential upgraders. They have experienced an increase in the equity in their current house due to rising property prices and want to use that increase in equity to buy a more expensive house.

Most buy at the level the banks will support. That is to say the banks willingness to lend on a property is what determines it's price.

Also many first home buyers and owner occupiers are willing to participate at auctions (in a seller's market), where there is a lot of buying competition, and a fear of missing out (FOMO).

There have also been instances where some owner occupiers may have been encouraged to overstate their income by mortgage brokers, and this has resulted in higher amounts being borrowed, and led to higher prices being paid.

These conditions may lead borrowers to take on debt levels that may not be sustainable, and put the borrower in a potentially vulnerable position. The borrower may be unable to hold on during an unexpected change in circumstances (e.g loss of income during a recession).

Forget buying a shitty house in CHCH. Buy toilet papers, lots and lots of toilet papers

the NZ herald?

Chairman, even shitty houses in Christchurch would be a better bet than buying toilet paper, as that is just money down the toilet!!!
If the main worry that people have is worrying about how they are going to wipe their butts, there is an issue with them.

If you think about it, you cant get a mortgage without insurance, and who wants to pay insurance premiums for ever and a day, they are a bigger waste of money than a mortgage.

Being mortgage free, AND insurance free is liberating, especially if all your houses are not in the same street or even the same town. Fortunately, we are now at the point where self insurance has become viable, only wish I had gone down this road years ago.

What an absurd comment. Most people can't afford to self insure their house, and that's a big gamble. Those that did (in CHCH) still had hand out to the gubmint to help them out when it all shook down

Perhaps the real reason you dont have insurance is the house is DIY and uninsurable?

My houses are all fully consented and insurable, spread over both islands in three cities and towns, including four in Christchurch, which were all repaired with engineers reports and consents. Even the cost of those repairs were way less than insurance premiums.

Really? With insurance at 100 or so a
Month? Sketchy repairers eh

you have no idea, insurances for rentals are way more than that, and we have multiple houses on some titles and you have to insure each of them, I don't appreciate your insinuations, I am a diy investor , not a diy builder

you have no idea, insurances for rentals are way more than that, and we have multiple houses on some titles and you have to insure each of them, I don't appreciate your insinuations, I am a diy investor , not a diy builder

you have no idea, insurances for rentals are way more than that, and we have multiple houses on some titles and you have to insure each of them, I don't appreciate your insinuations, I am a diy investor , not a diy builder

you have no idea, insurances for rentals are way more than that, and we have multiple houses on some titles and you have to insure each of them, I don't appreciate your insinuations, I am a diy investor , not a diy builder

So TM2, are you advocating to go out and buy a residential property for investment now ?

Speaking for Auckland, why would anyone buy a property for 1 million with a gross rental return of 3.0% ($600pw @ 50 weeks pa) ...less mortgage interest, rates, insurances, maintenance etc etc while "who really knows" with what is happening around the world now, as to which direction the value of the property will go ?

Or do you have better figures down south?

If the figures are right, then why not?
Personally I have never bought a property with a return less than 6% and only because there was so much upside with them.
Great time to be buying when there is so much going on, low interest rates, useless government and the virus.
These are the times when the good investors do very well, only when you are buying right!!

The Bot 2: if you were a lender would you lend to someone working in the travel, hospitality, tourism, events industry right now?

I'll let you know next week, going to ask ANZ for a small loan for renovations on my Motel

If there is adequate collateral provided, the banks may be willing to lend. For example, a business owner could get funding if the banks could take a mortgage on their house (assuming that the loan would not breach bank LVR limits)

Go for it. Personally very happy to have no debt in this environment.

Dp

Bad bot

If Corona Virus is not controlled soon and IF it spreads like it has done in Northern Italy and Iran to more countries than God Save the world economy will collapse all over before getting back to normal as no one knows anything and is all a guess work so solution/vaccine for corona virus is must to prevent bloodbath.

At this stage - if their is a news that Corona Virus has spread to other countries like it has in Italy and Iran than it will be a sign to prepare for Disaster irrespective of what any experts may say.

Yep ive definately taken the steps I need.

Got a load of PMs, Cash in dfifferent currencies and supplies. May seem alarmist now but could be insufficient in a couple of months time.

Who knows where this sh*tstorm is going to end up

Have you got enough toilet paper though? You do know it is the new gold?

Depends if banks keep lending.

Newsflash money is not the cure for Coronavirus.

Wait, what? Isn't it the cure for everything?

Banks are willing to suspend loan principal repayments and allow stressed borrowers to go on interest only payments for a period.

https://www.nzba.org.nz/2020/02/27/coronavirus-affected-customers-urged-...

And you trust the banks?

They will only do those things if it's in their interest.

"And you trust the banks?"

Yes, the banks can be trusted to act in their own self interest. That is why mortgaged owner occupiers should be prepared to ensure that they can continue to meet their mortgage payments under ALL economic conditions.

The banks are willing to ease cashflow stress for some borrowers, assuming they can continue to pay interest only for period of time.

If some highly mortgaged borrowers who are unable to continue on interest only payment terms (due to significant loss of income), then I'm not sure what the banks will do.

Love the house on fire picture. Captures the emotion that shoots through a home owners veins when they read that property prices may stall. I would add a sign to the outside of the house saying cute puppies inside.

Whether property prices stall , go up, or down, should have little effect to most people, as most people only own one home, and it is where they live. If they are selling, then they are also likely buying in the same market, so the net effect cancels out. Banks may get worried if they drop a lot, but that is the risk of lending for them, and hey must make reasonable interest from the loan to cover that risk.

Why do people continue to peddle this myth? This would only apply to people who have sufficient equity or guaranteed income.

The unfortunate reality is that for far too many recent FHB’s falling prices could result in financial ruin

How might a falling price lead to 'financial ruin'? Assuming they still have work, the value is largely irrelevant. Why do people continue to peddle the myth that banks watch the equity during the life of the loan? RBNZ rules dictate values are based on last credit event, so non credit events do not result in LVR changes etc.

Now, new lending would absolutely dry up and that would put pressure on those that might NEED to sell. But banks aren't generally in the business of calling in a loan and taking the loss

"Assuming they still have work"

That is the key assumption. Look at those in the tourism and logging industries who may have large mortgages ...

The focus on ostensibly caring about FHBs always comes out when there's any danger of improved affordability and impacted portfolios.

Looks like investor speak for "Won't somebody please think of the children!"

Always hard to tell with housing because the market is very illiquid.

So has Westpac made an actual forecast for house prices?

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Yes! It's gonna go up 7%! No, 10%! Wait, no, it's gonna be flat!
My prediction for Westpac predictions: It's gonna go down 7%! No, 10%! No, it's gonna go up again!

Would be nice if you could contribute a constructive post

It was very constructive. Only 2 weeks ago Westpac were saying house price inflation will hit 10%.

https://www.interest.co.nz/property/103691/westpac-economists-who-nearly...

Yes exactly. The virus looked very serious even 2 weeks ago, and they said +10%.
Westpac are big flip floppers, I for one can give them no credibility.

Zorro and his mates have a really average forecasting record. Yeah maybe we shouldn't be so harsh, Corona is a black swan. But a few economists and a few laypeople (me and a few others on this website) have been saying how fragile the economic system is, a problem would come somewhere out of the blue, but it is the fragility of the system more so than the shock itself that is the problem.
Can't Westpac, for whatever reason, see those frailties?
Or is it that they don't want to?

Or is it that these economists are posing as salesman / bank marketers to promote their bank employer as a potential lender for mortgage lending?

Hey Westpac...

Westpac economists, who nearly a year ago forecast surging house prices for this year, now say house price inflation will hit 10%

https://www.interest.co.nz/property/103691/westpac-economists-who-nearly...

Was that meant to be -10%

"It is important to remember, though, that this is a temporary disruption to economic activity, not a new long-run trajectory for the economy," he said.

"We anticipate a period of above normal GDP growth after the worst of the virus-related disruptions have passed, as the economy returns to a normal level of economic activity"

Based on the above description I would compare this to having to slow down at a GIVE WAY rather than a complete STOP. The country will recover quite quickly afterwards so it seems the near few months is the best time to go and buy investments or new first home.

Cant have the home renovation market dry up on you aye?

How are your plans to add that new extension.

Have never had any plans to add an extension. Current plans are to hunker down with my very low mortgage balance & 50% equity as a buffer.

You heard about the guy that built a deck because he wanted indoor/outdoor flow? He then added a roof to create shade. Next came walls to protect against the wind with a window so that he could still see out. Afterwards his young daughter wanted her own room so he lined and painted the walls and carpeted the floor to make it nice for her. Which all made him think he needed a deck to sit on after his hard work.

Good thing my father in law is a semi retired builder...

Tradies are the first to tumble.

Tradies have plenty of work ahead. Travel companies like air nz and tourism holdings are taking an actual hit. Most companies in the NZX are down sharply across the board because investors are taking a very risk averse view even though some of them are not directly affected. Is that a buying opportunity to pick up quality high yield companies cheap?? All depends on your perspective.

They're saying those things to not cause a panic. I'd bet serious money that all their top economists know shit's gonna hit the fan later this year because of the missed production / tourism / services etc. It's gonna have a ripple effect. Many mortgagees are living paycheck to paycheck. What happens if one such mortgagee misses out on 3-6 months of income due to job loss?

The bank economists say they are 'independent'. If they were, they would be calling it as they see it, not in terms of what the message should be.
Of course, it's bullshit that they are 'independent'.

Economists are only admired in arrears, and even then its the few lucky guessers. Hedge accordingly.

why are you admiring their arrears? #metoo

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Interesting how everything is blamed to coronavirus when all this had started a while back.The perfect scapegoat to hide their corpses under the rug.

Coronavirus is the catalyst, not the cause

One thing all you hopefuls are forgetting: a-c-t-u-a-l-l-y, if the Coronavirus causes your touted down-turn in property values it will be because there is an economic slump and even the budding FHBs will in all probability find themselves jobless. Soooo, even though houses will be cheap, yes hellishly cheap, very few people will have employment.....and thus will not be able to afford them very cheap though they may be. If the recession turns into a depression then there will a-c-t-u-a-l-l-y be many empty houses lining the streets.......isn't that right mum? (She's 96 yrs old and as a young girl lived at 4 Cromwell St, Mt Eden, in the very house owned by Helen Clark today, although my grandparents rented it back then.) The time I'm talking about was around 1927 to 1933 right in the middle of the Great Depression. Mum's always said that the streets of Mt Eden then were full of empty houses....people could not afford to pay the mortgage when they lost their jobs and just walked away from their properties....and usually ended up staying with relatives, often in a tent in the back yard.
However, it may be that in today's world the Labour government (or National for that matter) would at that point commandeer them for homeless solo parents or out-of-work families and give the bank (the mortgagee) an IOU for when the economy improves.
So, the moral of the story is that it is probably better that you have children if you think there is a recession/depression on its way.

Look forward to it.

Thanks streetwise. I have a feeling that they may have commandeered homes back in the day through the State Advances Corp as mortgagee. Probably not widespread practice

He forgot to add, with all that stimulus and delayed purchasing: inflation.
Plus the inflation caused by shortages
When the inflation comes, all will o doubt be surprised, having failed for 11 years to produce any with all their printing and QE to ever.
Economic incompetent.
Every economist outside of government and stock market hoopla inducers, has stated interest rate cuts will NOT work and are not appropriate.

It's because they're all supply side economists or trickle downies. They think that you only need investment to pump the economy, when really you need demand or consumers just as much.

Not many comments I notice on fact that Barfoots figures for February showed a median drop in prices of $65,000 to $820k. Hello, Yvil, where are you.

There is some product mix impact in that comparison. (I.e apartments vs houses)

For the westpac Pollyanna forecast of its all V shape recovery in June quarter: here is what might happen to credit market:
https://www.zerohedge.com/markets/vix-hitting-50-fed-must-now-step-or-ca...

Tourism will be dead in NZ for at least first half of 2020.
The extent to which the domestic economy will pick up in the second half will depend on how widespread the coronavirus is in the winter here. If its widespread, expect the economy to be paralyzed most of the year. If it's not widespread, expect the economy to pick up in July/August

Well thank god we have the OCR, we could just lower it in a recession to ease the burden on those with mortgages. Oh wait...

"And a slower housing market would have a flow-on effect on consumer confidence and spending."

Not right, the way it actually works is when housing prices get lower the income available for consumers to spend in productive economy grows. The only confidence high prices affect is those of speculators.

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