Deliberating Over COVID-19’s Regional Impact on Real Estate

Following the de-escalation of COVID-19 alert level, many people expect real estate to pick up. However, there is some concern about the effect in different regions. This may suggest that it is intelligent to focus on main centres, rather than the regions.


Data from REINZ shows that 6,866 homes were sold in March 2020. Although this was a 5% dip compared to a similar time in 2019, there were mixed results. Areas like Auckland, Northland, and Marlborough experienced growth, selling between 4% and 10% more homes. On the other hand, areas Nelson, Southland, and West Coast experienced dips. The sales in these parts plunged by between 20% and nearly 50%.


As a prospective owner-occupier, you may not have many choices over where to buy. Your choice is dictated by the location of your job or family. However, as an investment buyer, how the different regions respond to change matters. It should impact your decisions. A mortgage broker and experienced real estate experts or property developers may be your best pals right now. Here’s what you should deliberate on.


What could affect real estate sales?

Business leaders in the real estate sectoragree that there isn’t much data right now to make a confident forecast. Plus, COVID-19 continues to affect the real estate sector and the economy in general. Therefore, we can only speculate based on current indicators, history, and how other sectors respond.


Learning from what happened after the Global Financial Crisis in 2009, the real estate sector is likely to slow for now in some ways, but there are opportunities.


There will almost certainly be a resurgence. “New Zealanders are more likely to turn back to their favorite form of investment – the real estate market.” Said Bryan Thomson, Managing Director, Harcourts Group Limited.


A major factor that will influence house sales over the coming few months is employment levels. As Jeremy Couchman, a Kiwibank senior economist, predictsJob losses and business closures will mount. Vendors needing to sell in this environment will take lower prices, as previously motivated buyers are forced to sit this one out.” But the 9 percent price-dip, predicted by Jeremy may not be evenly spread.


Sticking to the main centres

Regions built onindustries that are less reliant on “off-shore demand” are likely to experience a faster economic recovery.


With this in mind, commercial centers like Auckland, Hamilton, and Wellington are likely to resume production and remain strong.


Likely, there will also be an economically-triggered migration to these regions since there will be more employment and business opportunities.


As veteran estate developer Andrew Yeoman, Managing Director of Atlas Property predicts: “Smaller towns might see a bit of migration towards the main centers. Auckland and Hamilton, perhaps Wellington should see the bulk of this internal migration and we may even see a slight pick-up in prices in these areas along with a stall or dip in the smaller towns.”


Towns that are likely to experience dips are particularly towns that rely on “industries dependent on off-shore visitors” such as the hospitality and tourism industry. Andrew picks out towns like Rotorua and Queenstown as areas likely to experience a stall or a dip(due to the no international tourism factor). A dip, or stall has also beenpredicted by Nick Goodall.

As an investor, it may be smarter to stick to the main centres.


Here’s the bottom line

If you dream of owning a holiday home in a quiet getaway fit for tourists, COVID-19 crisis could be your opportunity to buy low when others are fearful. Just as Warren Buffet would But remember to write down why you are buying.

On the other hand, if you are looking to buy in the main centres, like Auckland or Hamilton, don’t wait. People will always buy and sell homes, and activity in these centres could pick up faster that other areas. Don’t wait until the migration demand begins to pick up. Start to think about acting now. Reach out to a mortgage broker for Auckland or Hamilton for help.




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