The announcement that many were holding out hope for has happened this week. As of Thursday, we will officially be at Level 2. A new “Level” brings new questions about the economy, and the highly discussed and debated question of how will house prices be affected in the coming months.
So what is the Real Estate market going to look like in the next few weeks?
Firstly, there are 5 variables that drive the real estate economy: the average home price; number of annual sales; supply and demand; mortgage rates; and affordability, which takes into account wage increases (or decreases), inflation, and also unemployment rates. Unemployment has increased slightly over the past month, and is predicted to double to 8% by August this year. By 2021, it’s expected to come back to 7.5% (This is according to the Trading Economics global macro models and analysts expectations.)
So how does this affect the Real Estate market? I believe that the economy in general, and in particular the real estate economy, is going to come through relatively unscathed – especially here in Christchurch, and even New Zealand wide.
There are three main reasons why I believe this to be true. Firstly, there have been two government stimulus packages offered to business owners over the past 6 weeks. The Wage Subsidy Scheme was introduced for businesses at the start of lockdown, and aimed to help employers to continue to employ staff. And then recently, the Small Business Cashflow Loan Scheme was announced, whereby businesses can take an interest-free loan for up to one year. Secondly, the bank has offered the option of a mortgage holiday to customers who would benefit from this and a lot of people have taken advantage of this. And thirdly, we have historically low interest rates, with one bank even going below 3% at the end of last week.
In addition, the Reserve Bank has lifted the LVR restrictions for 12 months, and has loosened its criteria for investors and developers. The need to jump start the real estate market and the economy has been clearly recognised.
Perhaps you are thinking about selling this year, maybe sooner rather than later. A crisis like this initially brings about uncertainty in people, and causes us to ‘freeze’. However, there is light at the end of the tunnel and it does appear that New Zealand has contained the virus now.
I believe that there will be an influx of buyers in 4-6 weeks’ time, as with a return to “semi-normal”, certainty in people’s minds also returns, and their perception of the real estate market also changes. So if you are thinking about selling, then my recommendation is to firstly talk to an agent that you trust, and has a plan, strategy, and a process to guide you through the selling process.
In the current climate, I would highly recommend listing the property off-market with a soft-launch approach. Over the next two weeks, prepare your property for sale, and have our professional photographer come and take photos. We would then introduce your property to our extensive database of buyers looking to buy in the area, rather than going directly to a public marketing campaign.
The main advantage of this approach is that we may sell your property to a buyer without going to the public market. However if the property doesn’t sell, it also gives us the benefit of assessing the market’s opinion on price point. If feedback is in line with your expectations, then you can ‘officially’ go to the market with a realistic price guide towards the middle or end of June.
If there is anything we can help you with, please get in touch with our office or me directly. We are here to help you.
Nathan Najib