I realised a couple of decades ago, in my late teens as I was watching an economist talk about the property market, that often even experts are guessing. The property market is always hard to predict. But for what it is worth here are my 2 cents.
The economy will take a bit of a “punch in the stomach” for want of a more eloquent term and there is no doubt people’s confidence will be shot. But let’s not get too doom and gloom on it. As the feature image says, don’t panic. Don’t make any rash decisions. Take a step back, relax, and take a deep breath.
“The Wellington Market Will Be Ok Won’t It”?
Before the virus the market in Wellington was strong. The number of offers/tenders received on a property was often into the double digits and the list to sell ratio was extremely high (most properties listed were sold). I believe most of these people will still want to buy. It has just pushed their chance to make a decision back a while until the lockdown is lifted. I believe there will still be less supply than can keep up with demand. Many people may be thinking as they watch their KiwiSaver or other stock-based investments fall that bricks and mortar aren’t too bad. Let’s face it, a roof over your head is a need not a want.
The day before writing this blog I presented three offers on a home for sale here in Wellington that was unable to be viewed due to the lockdown. The owners accepted one. I have also talked to multiple colleagues who are still receiving interest in a property on the market.
In the interim, the banks have lowered the interest rates further. Money has never been cheaper in the 37 years that I have been alive. This generally has an indirect effect on house demand and prices.
Add to that Wellington’s shortage of land and housing and our strong public sector job market. Both of these factors help keep the Wellington market more stable in comparison to other locations. From what I see at the coal face, the market in Wellington shouldn’t take as much of a hit as other areas. We are a consistent city.
The locations that have strong links to industries that have been hurt through this pandemic will potentially see the most loss. Queenstown and tourism as an example. Through these events, history has also shown that coastal or holiday locations can also see loss due to the lack of confidence people have in purchasing holiday accommodation.
It will be very interesting to track inflation as we move forward. Inflation has averaged about 2.15% since 2000. I don’t think it will, but if inflation increases due to the drop in the supply of goods and we have more unemployment and slow economic growth as predicted it could get a little hurtful.
The Airbnb market will be an interesting one to watch. It is tough to see Airbnb working if there is any sort of medium to long term shutdown of our borders. I have already seen articles talking about people wanting to rent these properties or rooms out to more long term tenants. Many of these properties may even come onto the market for sale. I don’t think the Airbnb market being disrupted will have a large effect on the property market as a whole, however. Especially in Wellington.
What do moats and real estate have in common?
You may not think a lot unless you own a medieval castle. But an investor by the name of Warren Buffet who is a stock market man tries to ensure that any stock investments he makes have an economic moat. This means that competitors struggle to replicate it which protects the profits of a business. A business with a big economic moat has a competitive advantage.
I thought that this could be applied to New Zealand as a whole. We have a physical moat of water protecting us from the rest of the world and we are now seeing positive news reports around the world about our low mortality rate. This can only be a good thing going forward for the perception of our country.
There are a lot of variables and it is a wait and see for the moment. All we can do is take charge of what is under our own personal control to make sure we prosper. I would consider you to read my blog on a survive vs thrive mentality for some inspiration here.
Can I Still Sell My Property Through the Lockdown?
Long story short, yes you can. Especially if you had your home on the market before the lockdown was announced. As mentioned above, people are still making offers right now. However, be prepared for these offers to be conditional (possibly conditional upon physically viewing) and also be prepared that settlement will not be able to take place until sometime after full lockdown has been lifted. If a purchaser needed to get a building inspection or valuation done, this wouldn’t be able to happen in our current situation so also be prepared for that. If you can, it might even pay to consider taking your home off the market and waiting to sell until there is more normality. Logistically this would be the easiest option for most, however, I understand some may want to try their luck.
If you weren’t on the market before the lockdown commenced and/or don’t have all the marketing collateral put together (photos taken, 3D walkthrough completed, etc) it is going to be a struggle. I wouldn’t advise even considering it until the lockdown has been lifted.
Spend this time undertaking any work you were planning on doing before selling. In order to obtain a few ideas read my bang for buck guide to adding value. You could talk to your designated agent and tentatively book in a time to see them once able. Also, have your agent organize the home stager, photographer and others to move with haste and prepare your home once ready. If you have a scanner you could fill out a majority of the paperwork with an agent so you can rock and roll as soon as Jacinda gives the green light.
Can I Purchase a Home Right Now?
In this current world dominated by lockdowns and media reports of Coronavirus, it’s no secret that purchasing a home has become a whole lot more difficult. Buying a home can be a tough thing to do when physically viewing is out of the question. But it is possible. There is opportunity in this situation.
Why is There Opportunity?
- Those who have their home on the market right now will often have very genuine reasons for sale.
- You will no doubt have less competition when making an offer.
- FEAR – it is a big one. The Wellington market I work in has been pushing forward at a great rate of knots for many years now. The fear people selling right now will have is wondering where the property market will head in these uncertain economic times. They may consider a bird in the hand vs two in the bush scenario.
Remember, you will be hamstrung by the lockdown in regards to having the ability to undertake much of the standard due diligence you normally would. If you need any advice feel free to contact me.
