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Squirrel's John Bolton shares his thoughts on some of the supply and demand issues - and opportunities - in the post-lockdown housing market

Squirrel's John Bolton shares his thoughts on some of the supply and demand issues - and opportunities - in the post-lockdown housing market

By John Bolton*

This article is split into two sections. We’ll first explore the supply and demand issues, and secondly get into some tips and tricks to consider.

So, what drives the housing market and what does that mean post COVID-19? Ultimately any market will be driven by overall confidence and then by supply and demand issues. To state the obvious consumer confidence will take a hammering and house prices will fall but it is also an opportunity.

Supply side considerations

House prices typically fall the most when there is an oversupply of newly built and unsold houses. There is no oversupply of housing in New Zealand. Although a reduction in temporary visa and foreign students will reduce rental demand, this is partially offset by an influx of Kiwis coming back to New Zealand from overseas.

The majority of newly built houses are targeting the first home market, are priced competitively and reflect the underlying build costs and land values.

There will not be a reduction in build costs. Our Government will be competing with the private sector by kicking off large scale infrastructure projects. And building material supply-chains are still broken.

There could be a reduction in land prices. But even before COVID-19, there was pressure on land prices and for the most part it was resolved by developing smaller sections and increasing density.

Demand side considerations

Mortgage rates are at record lows, which improves affordability. However, this will be offset by lower post-COVID incomes. There will be high unemployment initially, likely around 10%, but it will be concentrated in the non-home owning part of the population. The majority of job losses will be across low wage industries – tourism, retail and hospitality. It will also hit on the gig economy, and youth unemployment.  The latter will be somewhat unofficial and go unreported.  I can just imagine how many students will stay on for an extra year of study!

The impact on house prices will be magnified in markets that rely on tourism, and given lower levels of home ownership it will disproportionately impact on landlords in these regions. Landlords will have to face into increasing rent arrears, lower rent yields, and other motivated vendors if they are trying to sell.

Rental properties are generally of poorer quality, and are expensive to rent. So there is always a strong incentive in New Zealand to want to buy and that won’t change. In many cases now, it is cheaper to own than to rent and that equation will improve further as house prices fall.

Keys on a key ring

Consumer confidence

The biggest factor driving demand will be sentiment. How will prospective buyers and sellers feel about their current situation and their future?  At its simplest house prices are a reflection of our view of the future, but that can also be self-reinforcing. People will feel less confident if they expect house prices to fall and that will push house prices lower.  In a deeply pessimistic market there would be no floor to how much prices could fall, but most Kiwis are still optimistic about the future and see this as a short-term correction.

Nonetheless, in the short-term there will be an increase in the number of vendors who need to sell. Any immediate pressure will be partial offset by the ability to take a six month loan deferral, and by very low mortgages rates.  Vendors who don't need to sell, won't sell and so sales volumes will plummet but not necessarily prices.  We've been here before.

The greatest pressure to sell will come from small business owners. They will be motivated vendors and prepared to take a lower price in favour of getting a deal done. This will temporarily drop headline house prices.

Business owners and other motivated vendors who may have lost their jobs will be in the market now.  And they will continue to be in the market for the next 12 months. The headline numbers reported by the media will take months before they accurately pick up the fall in house prices.  April will be an outlier and will be ignored. May will be surprisingly strong and likely a record month for settlements due to an accumulation of deferred purchases.

First home buyers will not have the confidence to transact in this market. However, those that do will have more opportunities to (1) find better properties with less competition, and (2) secure a property at a lower price. This will be a temporary phenomenon until the economy eventually kicks back into recovery.

Any loss of confidence is cyclical and temporary. The market will eventually recover and its hard to ignore very low interest rates and long-term migration. Buyers will procrastinate on the fence for a couple of years, miss the opportunity, and then surge back into the market like lemmings at the same time as everyone else as prices take off again; presuming construction stalls over the next couple of years and there is a lack of supply.

My thoughts on buying in this market

If you bought just before COVID-19 don’t worry – long-term, you’ll be fine. House prices will ease but not collapse, and any reduction will be short-term. The underlying drivers of growth in our economy are too strong and interest rates are exceptionally low.

The fall in house prices will be more pronounced in the upper two quartiles of the market. If you own an expensive house, then expect to get hit with a reasonable price fall.  I would expect entry-level prices to stay largely unchanged.

Don’t wait to be told by the media that it is a good time to buy

The opportunities will be out there now. It’s a myth that house prices fall gradually - that's simply the way it's reported in market statistics. At a transactional level, prices can fall quickly when vendors are motivated and need to sell.  The task if you will is to find sufficiently motivated vendors and they already exist.

Be patient

It is now a buyer’s market. Look at lots of properties to establish what good value looks like. There is no need to rush. But value is not just price - it is also quality. In a hot property market, it can be much harder to buy quality properties, or to buy in the right locations without feeling you've paid over the odds.

Sure prices will be low for a while, but will never find a good deal if you don't look. The biggest rewards go to those who put the effort in and have the confidence to zig when others are zagging.

Make sure you understand your risks

Especially around employment or relationship risk. This is not a market that you want to be forced to sell into, at least for a couple of years.  Stay employed and stay married.

If you are in a secure but lower paying job like teaching or the public service, then this could be an excellent opportunity to get into the market but be patient.

There will be far less hype in the market, so take the opportunity to be more conservative and work on a mortgage that requires less than 40% of your after-tax income for servicing. That equates to five times household gross (pre-tax) annual income. (Use our mortgage calculator to play around with some numbers).

We are going into a period where 20 percent deposits will be important again. Bank criteria is tightening and there will be emphasis on post COVID-19 income stability and bigger deposits.

Lock-down has shown how easy it is to reduce discretionary expenses. Take the learnings. Save more deposit or pay-off consumer finance debt and student loans as quickly as possible. This will free up income and will help with your mortgage approval. 

*John Bolton is the founder of Squirrel Mortgages. This article was first published on the company's website. It is republished here with permission.

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Buying a Home after Lockdown - what you need to know :

Do not trust RE Agents if/as will try to create FOMO :

*They will throw past sell data / price to fool you (Even stock market was all time high, Pre Virus)
*Even now many deals will be signed on pre Virus / High price so do not be fooled but wait as market was freezed which in a way helped House Price to also freeze or not fall as they would have.
* Common sense when world over everything is falling apart, how can house price be immune.
* Many RE agents will advise that now is the best time to buy as less competation so put conditional offer ( the vey word - conditional offer - they were allergic to earlier) and is not to lock good price for you but to lock good price for vendor as they know going future house price will fall. So whatever price vendor can get now is good price compare to what will get in near future.

Patience is a Virtue in this market :

* As will give you time to reacess your financial situation
* Opportunity to get more for your deposit.
* Stock Markets fall rapidly as highly liquid but house price though falls but lags by few months.
* Also give time to vendors to adjust to new Low.

Best scenario for housing market is fall by 10% so any offer if you like the house very much and desperate should be 10% below but if really want to hedge/ protect yourself of loosing your capital should be much more than 10%.

The fall that you see now is just the begining so wait and watch and BE AWARE of any RE Agent talking you into buying and also of any media or so called experts as many are influnced and have biased / vested intered to promote otherwise.

Having already lost the opprtunity earlier many will be burnt and will be hard to hard overcome FOMO but if one can, will get good opportunity in future so wait and watch n not try to catch a falling knife.

Have cash and looking for investment than even stock market can be consideded as :

* May give more return
* Hihly Liquid
* Can invest any denomination as little as $1000

Waiting period in housing market will be longer than stock market in terms of investement return but if looking for a home for self than top priority should be house.

Even for stock market is wait and watch as worse is yet to come and current relief rally ti be used to offload and be cash rich.

Remember that RE Agents gets commision fron Vendor so is working for them and many existing listing in market are when appraisal was done befire the virus was hit so is high... Emphasis is to wait as market has to fall in future and to avoid losing your deposit/equity. Cash is king if you earnings are not hit by virus.

Simple anyone who tries to create FOMO or talking in favour of buying niw BE AWARE of them.


Correct Be Aware of anyone saying that interedt rates are low ( low interedt rate is new norm and will be for years to come), or house price double every 10 years or 7 years ( Why pay million now if can get the same thing for $80000 or $850000 or may be much low - get more for your money as will be good for long term or comes with supply bullshit (though impirtant but is mostly used to promite speculatiin by lobby/experts) or using any other argument to buy now.

One does not have to be an expert as it is very clear and inevitable that house price will fall. Though may not crash but one cannot rule out crash as well as we are in unchartered territory where everything has come to a halt with no one knowing what is in store for future so do agree that Patience is a virtue and also that any FHB who can overcome FOMO (Fear Of Missing Out) will be a winner.

Many mum n dad new builders who streched and invested with no deep pockets will be hard hit and will be lucky if manage to sell at no loss no profit or with minimum loss.

House prices double every seven years. Buy now or miss out forever!

Has been true to date, give or take. Ashley Church has been predicting bottom of the current cycle 2021/22 for quite some time - looks like he is going to be correct, again.

When you say true to date, how much research have you applied to that statement?

Plenty. I'd say doubling every 10 years approximately, over the last 40 years or so. Feel free to prove me wrong.

Due Diligence,

Just wondering, when you are calculating the underlying demand for housing in Auckland, can you tell me:

A) at the current median household price for Auckland at $950,000, what is your assumption of the correct number of people per dwelling?:

1) 2.6
2) 2.7
3) 2.8
4) 2.9
5) 3.0
6) 3.1
7) 3.2
8) Other

B) how does that number of people per dwelling assumption change for every $10,000 change in the median property price in Auckland?

Those ratios will be changing as we type.
At present it's likely to be around 2.8, but will probably go to circa 3.2.
That makes a big difference in terms of the supply/demand balance.
Note this is inverse to the usual trend. That is, usually prices go up and occupancy pushes up. What we see now is prices drop and occupancy goes up. The former is directly causal, the latter not.

It would be interesting to know what Bolton has assumed in his calculation of underlying housing demand.

I suspect that he has not looked into the underlying housing demand calculation and taken economists calculation of underlying housing demand to make his statement "There is no oversupply of housing in New Zealand."

My opinion, at least for Auckland, is that underlyjng supply / demand is roughly balanced. However, over the next year it will tilt in favour of a mild-moderate over supply.

With the lack of immigration, I think you could be right.

The problem has been affordability rather than supply, and this virus thing is about to shake up the banking system which has been unregulated and out of control.

Governments will have no choice but to regulate them when the dust settles on this event. Their tax revenues will be down, costs up, with nothing but more overseas borrowing to keep us afloat until we are bankrupted as a country.

How can you keep afloat long term when you've had a trade deficit for thirty plus years. Like a household, the banks eventually say no to more borrowing; then sell you up.

Oh right - have a look back in REAL TERMS over the last 120 years or so and see what you find out.

Robert Shiller has a good index for the USA if you look at that and Nigel Stapledon has something similar for Aus (closely reflects NZ pricing). See if you can spot the bubble.

A reminder for all potential owner occupier buyers and current owner occupiers - choose your scenario and act accordingly.

Which will the owner occupier regret most:
1) missing out on future potential gains in equity?
2) potential loss of their savings invested as the initial deposit for purchase of the house or even potential negative equity?

For owner occupiers, a reminder of the impact of leverage (it amplifies property price changes both on the up and down):

Scenarios of financial impact of leverage on equity, assuming an 80% LVR for owner occupier, for a recent $100 property purchase, $20 initial deposit, mortgage $80.

A) Scenario - property price rise:
1) property price rises 5% to 105, mortgage 80, equity 25, so 25% gain in equity value from 20.
2) property price rises 10% to 110, mortgage 80, equity 30, so 50% gain in equity value from 20.
3) property price rises 15% to 115, mortgage 80, equity 35, so 75% gain in equity value from 20.
4) property price rises 20% to 120, mortgage 80, equity 40, so 100% gain in equity value from 20.
5) property price rises 25% to 125, mortgage 80, equity 45, so 125% gain in equity value from 20.
6) property price rises 30% to 130, mortgage 80, equity 50, so 150% gain in equity value from 20.
7) property price rises 35% to 135, mortgage 80, equity 55, so 175% gain in equity value from 20.
8) property price rises 40% to 140, mortgage 80, equity 60, so 200% gain in equity value from 20.
9) property price rises 50% to 150, mortgage 80, equity 70, so 250% gain in equity value from 20.
10) property price rises 100% to 200, mortgage 80, equity 120, so 500% gain in equity value from 20. (i.e if they believe that the property price doubles every 10 years)

Remember, the owner occupier must be able to hold on under ALL economic environments (including any potential significant reduction in household income).

B) Scenario - property price falls:
1) property price falls 5% to 95, mortgage 80, equity 15, so 25% loss in equity value from 20.
2) property price falls 10% to 90, mortgage 80, equity 10, so 50% loss in equity value from 20.
3) property price falls 15% to 85, mortgage 80, equity 5, so 75% loss in equity value from 20.
4) property price falls 20% to 80, mortgage 80, equity is zero, so 100% loss in equity value from 20.
5) property price falls 25% to 75, mortgage 80, equity is NEGATIVE 5, so 125% loss in equity value from 20.
6) property price falls 30% to 70, mortgage 80, equity is NEGATIVE 10, so 150% loss in equity value from 20.
7) property price falls 35% to 65, mortgage 80, equity is NEGATIVE 15, so 175% loss in equity value from 20.
8) property price falls 40% to 60, mortgage 80, equity is NEGATIVE 20, so 200% loss in equity value from 20.

Ashley Church was a five minute wonder as CE of the Property Institute, who knows as much about property as your neighbour.

Not much more than a very fast talker, who likes the sound of his own voice; and heavy into self promotion.


Buy now! if you dont mind seeing your deposit evaporate and some

- 20%+ coming

Less demand for our exports will impact wider markets and increase in layoffs, will leads to less demand for housing in short to medium term.


"The majority of job losses will be across low wage industries – tourism, retail and hospitality. It will also hit on the gig economy, and youth unemployment."

No. The amount of restructuring going on in white collar middle class jobs is huge. Think media, advertising etc.

Think about it - from a company's perspective, the wage subsidies fully cover cheap staff, but don't cover those on higher salaries. There is still the incentive to make middle management redundancies etc.


Low paid jobs, outside of tourism/hospitality which are all gone, will remain and increase with the exit of cheap imports. The big discovery post lockdown will be how many higher paid jobs don't actually need to be and infact don't actually do or achieve anything that requires paying for.

Farm advisors springs to mind.

Real effect will only be known after the event and one thing is definite that will be very bad.

There really doesnt appear to have been much thought in the supply chain either. With retail largely closed for another 3 weeks (and retail demand likely to fall off a cliff), importers and wholesalers are by default suffering along with the rest, B2B freight is way way down, conversely B2C is way up in the freight game. Port volume will drop significantly, all the ancillary services around all these businesses, the effect is huge, there is no escape.


Buy a house now and be the fly helplessly flying into the agents web.

Waiting will make them keen to work harder for a sale.



Or Japan - didn't they fall for 20 years or so and still haven't recovered? So if 20 years isn't gradual, I'm not sure what is.

Prices in Japan tanked in the 1990's, and havent recovered since.

There scenario is slightly different to ours. They are over populated, which is declining. No escaping the deflation here, especially when your interest rates cant go any lower.

NZ could cope with population growth, however lets ensure we have the infrastructure in place first, and keep immigration at a level where the infrastructure build can keep up. In addition, lets not price ourselves out of the market by charging a stamp duty of say 20% to overseas investors buy housing here.


The 2-bed entry level homes on the old Navy land in Belmont start at @$1 million. $200,000 deposit, hmmm. Hard to see anything but a cliff edge given the pressure on rents. If you’re a fhb, I would be very cautious given the danger of catching a falling knife at the moment. Actually, surprised gave Mr Bolton oxygen. And as far as the advice “above all, stay employed and stay married” goes, why not add “and try to win Lotto”.


"Stay employed and stay married."
Right there; in that one comment is the fragility underpinning the current market.
Those who 'think' they're employed and married today may find that when the Government support mechanism of 12 weeks comes to an end, so their circumstance irrevocable change. And with that comes a major change in one of the tenants Bolton relies on for his opinion " There is no oversupply of housing in New Zealand". There is about to be.

Stay employed and stay married - best quote so far and very important


No over supply in Ireland either before the crash...certainly an over supply during and afterwards.

I doubt Bolton relies on "tenants" for his opinion however he may have some tenets which he could use.

Grammarly autocorrect is such an annoyance every now and then. Start writing about 'housing' and it thinks it knows best!

"For better or worse, for richer or poorer, in sickness and in health... "
Quite a challenge!


"Dont worry captain, it's only a big ice cube".

Anyone know if John Bolton owns rentals? Just trying to see if there is any bias in his opinions.


Mortage broker... More people opting for mortage or refinancing.... More the commision.

There have been some anecdotal stories of mortgage brokers in NZ encouraging borrowers to undertake mortgage fraud in loan applications. Refer Big Data's experience.

IO i am on all the property investor forums and social media groups (i am not an investor but it's important to observe such an important aspect of the NZ economy in its natural habitat ;-) ). They are all full of Mortgage Brokers tripping over themselves to spruik the property market and recruit as many new clients as possible. I've never heard a single Mortgage Broker express any caution in regards to the purchase of a property or the level of debt a client is taking on. On as it pertains to what they are able to achieve in the course of earning their commission.

If anyone wants to consider the possible bias of the Mortgage Broker, remember the roll they played in bringing down the world economy prior to the GFC or refer to the Mortgage Broker scene in The Big Short;

Some of the property mentors are now telling their audience to keep cash on hand, and prepare for recession.
Tony Alexander is now talking about property prices falling, and trying to save his reputation so as to be hired as a credible economic / housing market commentator.

Their advice is all after the fact, and not of any use to those who took their earlier advice, and bought houses with high levels of debt, and likely to experience a loss in their equity (especially for those who are going to lose their jobs or business).

What's the sentiment on those forums?
Is there still a lot of irrational exuberance?

I follow one.

The key comments to the articles highlighting potential property price risks:
1) labelled as fake news / click bait
2) dismissing the price warnings in the articles, as how economists were incorrect in 2008 of their property price crash predictions, and expected to be incorrect again
3) there is an underlying shortage of housing so property prices will not fall by much
4) property prices fell by 10% during the GFC and this is as bad as it will get.
5) some professional property investors with portfolios greater than say 5 are getting increased credit limits so that they can buy.

It is also interesting that the moderators previously deleted any comments mentioning a possible fall in property prices.


Real estate agents, mortage brokers, builders... All realted and benefiting with housing ponzi that was promoted and supported by national in NZ are bound to come out in full force to creare a smoke or different story so any advise from them to be taken......

I will be buying in next 6-12 months but at the right price i.e big big discount just offer your best offer and make sure you knock of at least 20 percent or more and if they say no walk away this market is now a buyers market and sellers have no leverage anymore.
Agents need to be put in their place take them out by making your offer your best offer(but discounted) first up take it or leave it approach and put in a condition stating 24 hours before you move to next property this shows them you are prepared to move on to next house and they are forced to take it or leave it no games.
I am picking you will have at least 20 houses that you will be able to put offers on so use that to your advantage and you find one who needs to move and meet the market and leave the greedy ones sitting on market.

There should be some good deals in the next 6 months. More for FHBs than investors though. With rents dropping there won't be much improvement to yields even with falling prices.
And you can count out a house price boom again.

I just did some calcs on the last place we rented, in Meadowbank, until late last year.
CV was $1.6 million, and rent was $800pw. So a gross yield of circa 2.5%.

If that sold today for $1.3 million, and the rent was $725 pw (what it was two years ago), then the gross yield is still only a pathetic 2.8%.

If that sold today for $900K, and the rent was $725pw, the the gross yield is starting to look at bit better, something quasi-acceptable, at 4.1%.

So it's case by case, obviously, but when one looks at that property it would need to experience a price fall of circa 40% to start to look semi-promising as an investment.

And that is assuming that the rental rate from two years ago ($725/week) is still viable. The market rental price could easily fall more than 10%. Especially under the guise of lower interest rates currently I think if my tenants asked for a 10% discount I would happily oblige and lock them in for a year as soon as possible. It will be interesting what comes through as new leases are taken on over the next few months.

Really , i believe we need to let the dust settle ,my gut says it aint going to be pretty in the short to medium term ,we have had a number of redundancies in my organisation and my position is under review again in 8 weeks ,im already seeing a higher level of tentiony between employees who are trying to hold on to their positions,customers my organisation have had on the books for between 10 and 40 years closed permanently.
The biggest concern i have is i watch every dollar i spend and i wont be the only one ,this also has an impact on companies that produce a lot of these products ,demand will be impacted and jobs will be loss globally.
NZ is in great position food wise ;but,doesn't have the population to consume all our export volumes ,i would not be surprised if export markets decide to protect and promote their own locally produced product.
Unfortunately NZ is a small fish in a big pond and what happens globally will affect us much more significantly we think.
Will the market rebound in terms of jobs and exports in the future -yes they will-when??? ,what will be the impact on wages not sure ,over priced housing in NZ -no idea.
A lot of do called experts prefer to set of the fence and see what happens ,buying a house right now -madness unless your in a hole.

Wishing you well over the next eight weeks and beyond.
Uncertain and scary times for all.


Buy one now, it will double in value in 7 -10 years.

Correct if I buy now for million it will be two million in10 years - WILL DOUBLE but if I wait for sometime and buy same for 800000 and it is 2 million in 10 years time WILL BE 2.5 TIME.


Correct if I buy now for million it will be two million in10 years - WILL DOUBLE but if I wait for sometime and buy same for 800000 and it is 2 million in 10 years time WILL BE 2.5 TIME.

So..... opportunity to get more for your $$$$ as for many this is a home and also the biggest investment in life.....

'House prices typically fall the most when there is an oversupply of newly built and unsold houses. There is no oversupply of housing in New Zealand. Although a reduction in temporary visa and foreign students will reduce rental demand, this is partially offset by an influx of Kiwis coming back to New Zealand from overseas.'

Flawed comment.

'Mortgage rates are at record lows, which improves affordability. However, this will be offset by lower post-COVID incomes. There will be high unemployment initially, likely around 10%, but it will be concentrated in the non-home owning part of the population. The majority of job losses will be across low wage industries – tourism, retail and hospitality. It will also hit on the gig economy, and youth unemployment.'

Good comment.

Depends on where you live. Wellington, with high levels of government workers, won't see a large change in salaries unless Parliament gets involved. Even then, if departmental budgets are cut. most places will just not give pay rises and not replace departed staff. Salaries are unlikely to change for the government grunts.

Yep. As I called it the other day, Wellington likely to suffer only minor price drops. I think I said -3%.
I agree with his central contention - and have said this myself - that the worst affected in terms of unemployment will be people who don't, for the most part, own houses. Although he probably underestimates, a little, the impact of failed businesses and loss of white collar jobs. But I think overall, he's right that the big job losses will be in retail, hospo, tourism.

The other thing I have said before - well before this crisis started - was that the huge number of people on work visas could one day be a blessing as well as a curse, WTSHTF. I think we'll see that borne out. It will help limit the extent of unemployment.

I am struggling to answer this question locally for ANZ - can anyone help?

While rates may be kept low for a while, have lenders tightened criteria for mortgages? Will new borrowers find that they can now only borrow a smaller amount than pre-shutdown?

I wonder because I have been looking to buy and need to borrow about 2-2.5 income but I think I was competing with people borrowing many times more. I thought that if this changed (like the max 4.5x lending in Europe post GFC) then that would pull prices back.

The FOMO is strong in this one.
Also conveniently failed to mention the drops in rental prices: "In many cases now, it is cheaper to own than to rent and that equation will improve further as house prices fall." - Rent will go down too, so renting might be cheaper than owning.

Rents are already dropping fast in some areas.

John The Debt Seller trying his hardest to pull last few first time buyers into his sticky web

Look the tulips just don’t have the value you think they have and you all paid way to much for what you have. Lockdown the hatches and have some of the medicine we all took after the GFC.

Now even RBNZ is planing to remove loan to mortage restriction and this is in situationwhen many are losing their jobs and business.

Attitute should be like RBNZ as who cares as long the bubble created is sustained (though not possible this time by throwing any amount of easy and cheap money) and banks should be more carefull but they too may go overboard as are playing with deposit and money of average kiwi in case of going burst.

Question to be asked is this the time to be more realxed or vigilant to give easy loan and create more risk.

If RBNZ doing it, is it helping or leading to disaster of the worst kind, as will happen and not when it happen.

Is RBNZ Friend or Foe ???

Or may be foe in disguise of friend - more dangerouse.

House prices typically fall the most when there is an oversupply of newly built and unsold houses. There is no oversupply of housing in New Zealand.

No mention of air bnb, i was trolling through trademe rental listings in ak the other day, a lot for rent fully furnished.... hmmmm uncle squirrel, where did they come from ?

Yes, that's an obvious thing missing from his article.
He also didn't address the apartment market - likely to drop a lot in central Auckland.
Remember that's a big market, upwards of 20,000 apartments

And gee, they ain't cheap. Pretty average, and cramped, 2 beddies in central Auckland for $550-$600pw.
Those rents need to come down to circa $475-$500 if they want to get them let.

Exactly. The "no oversupply" rhetoric that fails to look at all the glaring ways that supply is about to come on line and demand is about to death drop;
* Air B&B and tourism sector property
*Sudden and rapid decline in Visa applications
*Sudden rapid decline in overseas students
*Rising unemployment making multiple mortgages untenable (those who need to liquidate assets to see through this recession)
*Boomers approaching retirement who just lost a huge amount of their pension value and will be forced to downsize
*Highly leveraged property investors/speculators who had low or non-existent yield and banking on equity for feelz (no NOT you TM2 we know you have decent yield and buy undervalue and love Christchurch long time)
*Sentiment change or animal spirits, or however you choose to understand how we humans experience a big black swan landing on the pond, where your amygdala takes over and you become "fear" minded rather than "greed" minded. Behavioural Economists (with plenty of studies to back them up) maintain that this is the true cause of most booms and busts anyway.

Excellent analysis.
I do think the massive fiscal response will buffer things *a bit*, though

There's likely to be a lag of 2/3 months minimum for Government funded projects to get off the grounds.

Sure the $585 per week may keep going till then, but it doesnt fill rental costs of $300 per bedroom.

Here's some more potential supply to market for properties for sale in the existing house market

How many non resident owners could sell their properties located in NZ?

How much of this property could have been purchased using "laundered" funds. If they receive 50% of their funds back it's still a gain, meanwhile they drag the market down.

Probably best not to take too seriously advice from someone on the mortgage market sell-side. Chances are it’s going to be less rosy. There are a lot of assumptions in this article, that may not play out as stated. I certainly question the statement that build costs won’t come down. I think the building boom just ended, yes costs will come down. They are/were very expensive. And land values may drop a lot more than industry estimates. We may be in for an old-fashioned bust.

Overall, an excellent article, with one or two questionable statements.

The bit between the first and last paragraphs being questionable ?

It'll be interesting to see how long the ban on incoming overseas passengers will last. It will be the defining factor of this scenario "Housing Bubble meet Needle!"

Is this a paid advertorial? Serious question.

Mortgage interests are low. Think that this will automatically generate a spike in demand for houses???? Well ,that's what the RE agents will spin & make you believe. I personally know of prospective buyers who have entered pre-COVID-19 into conditional contracts with pre-approved mortgage financing. Suddenly, the banks have become jittery. And re-visited the pre-approved loans with requests for information about job stability, etc. If one is in aviation, hospitality, tourism, try walking into a bank & applying for mortgage. Even with the heater on full blast the bank guys have developed cold feet!!! Only real estate guys will be Doubting Thomases!!! But, then you know what they spin for public consumption & what they really feel are different

If the Ocr went negative, and retail rates came down to 2.5%, then that would help support the market further.
Whether they can or will...Personally I think they will

I understand Banks are already offering under 3% so not much more to gain from waiting for rates to drop (anyone care to comment)?

Still better to buy IMO. If you own a house for 7 years, even if you lose equity there's a better than even chance that in 7 years you won't have lost money, and you'll be paying off your debt all that time.

"If you own a house for 7 years, even if you lose equity there's a better than even chance that in 7 years you won't have lost money, and you'll be paying off your debt all that time."

Saw a house recently purchased in Auckland. By my estimates, the owners will likely to get back to their original 20% initial deposit in 15 years time, as they massively overpaid for the property (which has no development value), assuming the house is substantially unchanged. And they get the privilege of paying for that with interest.

there was never an under supply of property. just an under supply of property for investors/speculators

Food for thought regarding Auckland house prices

A) December 2007 - September 2008 (GFC period)
i) NZ unemployment 4% (peaked at 6.7% during GFC),
ii) NZ GDP growth for the period say 3.0-3.5% (bottomed at -2.0%)
iii) median house price fell from $460,000 to $420,000 (or by 9%)

B) March 2017 - Jan 2019
i) NZ unemployment 4%,
ii) NZ GDP growth for the period March 2017 to Jan 2019 averaged say 3.0% p.a,
iii) median house price fell from $905,000 to $805,000 (or by 11%)

C) March 2020 - ??
i) NZ unemployment expected to be 10% or higher,
ii) NZ GDP growth - expected to be negative - supposed to be the worst economic performance in 150 years (Ken Rogoff, economist, economic historian)
iii) median house price falls forecasts of 10% by banks - is this forecast inconsistent with the previous economic scenarios?

List of people to ignore atm
Real estate agents
Mortgage brokers

I expect there will be plenty of distressed families that will need to consult all of those people. There will be many hard decisions to be made and as much advise as possible, should be sort. I think we need to drop the old energy paradigm where these groups are though of as enemies. They usually facilitate an arrangement between two or more willing parties !!

+ Bank Economists, and ex-Bank economists (especially one in particular)

Also Herald spruikers, A Church and to a lesser extent L Dann.

Here's some more potential supply to market for properties for sale in the existing house market

How many non resident owners could sell their properties located in NZ?

Yes, I've mentioned that several times over the last couple of months.
I'm sure it will be a factor, whether it's a moderate or major one - time will tell.

Remember who the broker work for.. his own boutique firm, his writing must be bias towards his business.
Subconscious at work - He'll never be like the rest of us, specific bands of professionals soon to move out from this dust bin.


Not long ago it was FOMO, then FONGO and now it's FONSU (...Not Selling Up)

If you have good, reliable income then possibly a good idea to buy now - so long as have a solid deposit and can lock in for 4-5years. Why? Because once this depression really kicks in the Govt will start printing money in finest left-wing tradition, inflation will skyrocket and mortgage debt will evaporate at an increased rate as it did in the late 70's- mid 80's to set up Boomers for life.

I am not sure about the 6 month timeline, many have been given 6 month deferrals, its hard to sell over Xmas, so I think the real level of clearance may not be found until March-April 2021. Queenstown is going to see huge falls in 2021, Bare land around AKL will be good longer term buying but there will be a queue of Chineese investors in front of you.....

I KNOW the real bargains will be business assets, 10c in the $1 - but you need some basic ability to run a business vs borrow money from a bank and play the property bubble. Once this is all over kiwis will hate property as much as they hated shares after 1987