Market Comment April 20th 2020

It is now almost week four of an unprecedented national lock-down to limit the spread of Covid-19 and the country waits for news from the government as to whether we as a nation can emerge from isolation within our homes and move from Alert Level 4 to Alert level 3. That announcement is today. The big question is what will the New Zealand economy look like after a month of all but essential services not doing any business? How long will it take to return to normal and what is normal from this point onward? There are so many questions, but let's look at what we do know.

We know that when we went into lock-down, our economy was going very well. We know that the sales of residential real estate in January, February and March were strong in Dunedin and we had a 'sellers market' where demand outstripped supply. Emerging from lock-down will not see this fundamental supply and demand equation changed at all. There are many sellers in that first quarter of the year who did not buy prior to the lock-down and one can only imagine their need to settle into a home soon. Also, while in lock-down three things would have happened; 1.0 Partners decided they loved each other and will remain happily together forever 2.0 They decided to conceive a child 3.0 They decided that they no longer want to live with their current partners. When we look at this, in the brave new world we are about to enter, there is a need for a bigger home for some and an entirely separate home for others, so the need for real estate post lock-down is undoubtedly greater.

In a survey conducted of New Zealanders in lock-down in mid April and published in the Sunday Star Times yesterday, it stated that nation-wide, 58% of respondents (1000 in the sample) felt house prices post lock-down would continue their upward trend. These people clearly feel our demand and supply problem will continue to exist post lock-down. The big question is how will unemployment and lack of debt servicing ability effect that demand? Will there be a period post lock-down where newfound freedom opens people's wallets and things look buoyant for a while and then we see some brakes come on as the economy's woes come home to roost? Who really knows quite what will happen in the medium to longer term, but it is fair to say that the government, the opposition, the Reserve Bank and every New Zealander wants normality back and are prepared to do whatever possible to make that happen. One thing is for sure, we are all going to come out of lock-down ready for action and with a new sense of community and these are wonderful attributes with which to surge forth.