The emergence of promising Covid-19 vaccines probably won’t make much difference to New Zealand’s housing market next year, experts say.
The real impact on the market will be the low interest rate environment, says Brad Olsen, senior economist with Infometrics.
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“They are going to be lower and they will continue to provide a huge amount of stimulus into the housing market so that will push prices higher.
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“The LVRs will affect things as well, in the sense of the banks making it clear they’re not so keen on risky lending so there’s a bit of a push/pull, give with one hand, take with the other on the lending front.”
Another area to watch is what happens with migration towards the end of next year. With fewer people coming into New Zealand there won’t be as much demand and as much heat in the market as currently being seen which should pull prices back in a slightly softer way.
As for a vaccine, Olsen says other the other factors will have much more direct influence on the market.
“On the vaccine front it might well be there’s therefore less interest in moving back to New Zealand because people are more able to stick where they are for a bit longer which might dampen a bit of housing market activity because of even further declines in net migration.
“On the other hand, it obviously opens up the economy a bit more but I think the main story remains interest rates.”
OneRoof columnist Ashley Church says New Zealand is in a special situation with life already going on pretty much as normal so is doubtful a vaccine will make much difference.
New Zealand house sale figures for November are expected to eclipse those for October. Photo / Fiona Goodall
“If you asked me that question and you were in the UK or the States or somewhere my answer would be a qualified yes because there will be clear distinction between pre-Covid and post-Covid.
“But I don’t think there is for Kiwis. I think if confidence was going to be attached to better times we’re already in it.”
The cheap cost of money is what will continue to impact house prices next year, Church says.
“That’s my answer for the last 40 years to be honest.”
Housing booms are often blamed on all sorts of things, such as foreign buyers and investors but none of those have really made much difference to house prices.
OneRoof commentator Ashley Church doubts a Covid-19 vaccine will have much of an impact on house prices. Photo / Ted Baghurst
“If you go back 40 years and look at the various things we’ve blamed, and that’s been an evolving narrative over that time, we’ve progressively fixed them but the fix in each case has made no difference in house prices – not one jot of difference.
“I’ve very strongly come to the conclusion the thing that’s driven house prices for 40 years is the reducing cost of money.”
Even the LVR, instigated in 2013 to reduce house prices, didn’t work, Church says.
“In fact, from 2013 to 2019 prices doubled. The only thing that’s consistent throughout that period is the reducing cost of money and that makes sense because of the cost of money goes down you can buy more house.”
Economist Tony Alexander says while a successful vaccine roll-out to the developed world will place upward pressure on house prices it won’t be substantial.
“I think that sort of upward pressure would be lost in the wash of other factors such as continued low interest rates, shortage of supply, confidence in the economy and employment generally.”
In September, Alexander coined the terms Vac Day and Vis Day, with Vac Day being the day people start getting vaccinated and Vis Day being the day visitors start pouring into New Zealand again, in order to indicate he does expect a leap of confidence here and abroad, and says increased confidence does tend to place upward pressure on house prices.
“It would definitely be positive for world growth and therefore for New Zealand growth so technically yes it would be a source of some upward pressure but I don’t think it will be the be all and end all.”
