2020 was anything but predictable and most of the “experts” who speculated on what the property market would do were left with egg on their faces. In this issue, Bryan Thomson, Managing Director of Harcourts New Zealand, reflects on the year that Covid-19 hit our shores and the factors driving the property market in 2021.
Goodbye 2020
While most of us were winding down for the holidays, the real estate market charged into the festive season with great momentum, both in terms of record numbers of transactions and positive price growth across New Zealand. This activity was driven by several well-known factors including historically low interest rates for those borrowing to purchase real estate and extremely low deposit rates which encouraged those with cash to pursue better returns in areas other than bank deposits, which included the property sector.
Record low interest rates also opened the door to first home buyers, enabling those who were able to secure a deposit to fund a mortgage at levels below rental payments. Our Covid-free status lured Kiwis back, many of whom required homes, and closed borders saw those with funds intended for offshore adventures redirecting them into a property purchase, renovation or other asset class. All these factors remain in play for 2021.
Business confidence
The level of business confidence varies across New Zealand. Tourism and hospitality orientated locations and sectors obviously remain challenged and are reinventing themselves until our borders open. The determination and resolve being shown by those impacted is a tremendous reflection on the human spirit. Other sectors experienced the opposite reaction after the Covid lockdown period. The property sector found itself on the positive side of the ledger, driven by the factors mentioned previously.
Covid-19 and the property market
New Zealand has come through the pandemic better than most countries thus far and the challenges being faced by much of the world provides a stark picture of how important it is for our community to remain focused on keeping Covid out. We have shown how adaptable the real estate profession and our clients are through the continuing transactions over the peak Covid period, but that is not a scenario we wish to repeat. It has however proven again that real estate is a fundamental human need and those looking to buy or sell will find a way, despite the challenges. The real estate industry is well prepared to provide solutions, regardless of what 2021 brings.
Where to from here?
The most common question I have been asked over the summer break is, “What is the market going to do in 2021”? As usual, there have been a raft of commentators willing to provide their opinions on this. Ironically, many are the same commentators who predicted a massive decline in the property market due to Covid, and we know how wrong they were then!
The reality is that hindsight is the only accurate predictor, so let’s focus on what we know. Firstly, the factors that drove the strong market we enjoyed in 2020 remain in play. Additionally, New Zealand continues to have less property available for purchase than buyers wanting to buy. The supply demand equation drives every market including real estate and until this evens out through construction and development, we can expect the current market to continue.
The reality is that most people buy and sell property because they need a home, whether it’s something newer, bigger, smaller, a change of location or as an investment. Very few buy to speculate, so if you’re looking to buy or sell right now, I suggest you do so in a market that is positive for so many reasons. If you believe you can pick what will happen in the future, then back your own judgement and live with the result, but I wouldn’t put my life on hold based on a guess. Look how that would have worked out for those commentators who filled the media with their tales of gloom earlier in 2020!
If you’re looking to sell, select a great agent who can explain how they will maximise competition for your property, and then trust their advice. Investing in a well-planned marketing campaign is a critical success factor. If you are buying, make sure you do your homework, especially regarding your financial capacity. Use the key property portals and visit open homes to ensure you have a good understanding of the market. A great agent is a big help here. Once you’re ready to go, identify the non-negotiables in the property you seek and jump into the market feeling positive and well-prepared!
