The world is on recession watch and while some countries are more vulnerable than others, there are fears that the contagion will spread to New Zealand.
The last time the world plunged into an economic crisis, the GFC, New Zealand house prices dropped hard, so how real are the risks to the property market now?
The reason economists are jittery right now is largely due to China and the US. China's industrial output suffered its weakest growth since 2002, and the country is involved in a trade spat with the US launched by a highly mercurial president, Donald Trump. Also adding to the gloom is the news that Germany’s economy has shrunk as exports slumped.
China is linked to one of vulnerabilities in the New Zealand economy - dairy - and how that sector is performing has started make watchers nervous.
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BNZ chief economist Tony Alexander warned this week: "It would not be surprising if at some point credit rating agencies were to look through the good state of the government’s finances and issue a country downgrade warning on the basis of this export sector vulnerability."
Alexander does not think the outlook for the sector is "overwhelmingly bad" but it should be added "to our growing list of sectors which are struggling despite high levels of customer demand".
He adds that the economy is no longer growing at the average of 3.5 percent per annum seen from 2014-18 and is now closer to 2 percent and probably still slowing.
Does this mean a rough time ahead for the housing market?
This week REINZ reported a lift in house sales, with sales volumes for July up on the year before, and prices in smaller regional centres, where there is a higher share of affordable homes, continue to perform strongly.
The RBNZ took the country by surprise by slashing the OCR to a new low but it believes that government policies, slowing population growth, and increased construction activity will continue to supress house price inflation.
Westpac economists, however, believe that falling mortgage rates will outweigh any negative forces in the property market and that house price inflation will rise seven percent.
Alexander is more cautious but believes recent positive sales activity, spurred by low interest rates, means "maybe we can have a flat to slightly positive outlook now for real estate turnover in the coming year".
OneRoof property commentator and former CEO of the Property Institute of New Zealand Ashley Church doesn't believe the market is at risk - even volatility continues in other parts of the rest of the world.
“If market history is a guide I don’t expect to see a recession lead to a significant drop in New Zealand house prices," he says.
“You have to go back to the 1970s to find a significant drop in Kiwi house prices – 38 percent between 1975 and 1980. This followed New Zealand’s first modern ‘house price boom’ and while there is debate around what caused the drop, it was likely to be the result of two dramatic spikes in the global cost of oil and the loss of our major export customer when the Brits entered the European Common Market (now the EU) in 1973.
"Such a drop has never happened again – probably because Kiwis have become more accustomed to property cycles and have learnt to weather economic storms rather than succumb to panic as other housing markets do."
He adds: “Like the property cycle, the last three significant global recessions have followed a 10 to 11-year pattern with major economic downturns being triggered by the sharemarket crash in 1987, the Asian Financial Crisis in 1998 and the Global Financial Crisis in 2008.
"While the last two of these clearly had an effect on property prices – neither triggered a crash in the property market. Auckland prices dipped after the 1998 Asian Crisis, bottoming out 6.6 pecent lower - and again after the GFC in 2008, bottoming out at 8.6 percent. Both of these dips lasted a little over a year before house prices started going up again – and both were on the back of house price booms which had seen house prices roughly double over the previous decade."