As New Zealand goes through a gradual reawakening following the lockdown, the main focus is on managing health. However, there’s an economic aspect that cannot be ignored. The COVID-19 health crisis ground nearly the entire economy to a halt and has affected people’s perspectives in as far as how they carry on with their daily activities. Much of the economic recovery depends on how we feel about the new reality.
Fortunately, real estate is showing positive signs of recovery. The four-weeks long level-4 lockdown caused a 78.5% drop in property sales. However, according to real estate professional CJ Ratwatte in Auckland, there are signs of recovery.
“We are seeing an influx of buyer activity at the moment. There are always people transacting real estate, people make decisions based around their life regardless the market.” CJ suggests that there will be a boom. He says “It’s a great time to set yourself up for the next boom cycle. There are so many different avenues of how to spend your money in real estate”
He is not the only one having this view. Bryan Thomson, managing director, Harcourts Group Limited opines that it may take some time for amateur investors to regain confidence. However, Kiwis will soon be back to their favourite form of investment – real estate.
But how will the markets recover?
Here’s a brief, look at how real estate in New Zealand will recover after the COVID-19 crisis.
Bryan Thomson gives us a clue. He reckons that past crises can show how the market responded and recovered. Bryan specifically points out two of the most recent large-scale crises that hit real estate in New Zealand: The Global Financial Crisis and the Canterbury earthquakes. In Bryan’s view, although on both occasions the hit was significant, “the market returned to positive territory reasonably rapidly.”
After the lifting of level-4 and level-3 alerts, one could say that we’ve gone past the worst. The lockdowns caused a great deal of damage to economic activity. But it was necessary and Kiwis were smart enough to keep their cool and follow the recommended guidelines. Right now, markets are re-awakening but people are cautions of health issues and dread the ensuing economic crises.
Once again, real estate in New Zealand faces another unprecedented challenge without a handbook to guide the recovery. Just like in Christchurch, well-calculated moves such as redesigning the city, supporting home repair schemes and new laws will ensure the robust sector resumes.
This time, vaccination may put a leash on the coronavirus. However, as Bindi Norwell of REINZ notes for real estate in New Zealand to be bustling once again, consumer confidence and access to finance are key.
Opportunities in the horizon
After the Canterbury earthquakes, people’s outlooks changed. Also, there were new rules introduced to govern the rebuild. Although delays occurred owing to landowners conforming to the strict design rules, financiers chipped in and rebuilding took shape.
In the same way, CJ foresees a post-COVID-19 a shift in design rules. He posits “A pandemic like this costs the government a lot of money and it is in their best interest to provide the platform for the building of pandemic proof spaces of living.”
This is an opportunity, not a setback. As CJ points out, “real estate is something – once built will be used for 20-30-40- sometimes 50-100 years.” Thus, for developers, it’s a great time to invest in structures and opportunities that will help home buyers become more resilient to pandemics.
But they will have to address the needs of more conscious buyers.
More conscious buyers
After spending so much time confined, buyers will be more conscious of what works for them. As CJ pointed out, “people will make moves based around their life and not the market.” They will be more aware, and assertive of their preferences.
They may budget for extra due diligence and get independent reviews and legal advice. Buyers are likely to dig in for more information before making a move.
This is perfectly okay. CJ mentions that “information in this industry is something that is crucial because the lack of the right information can cost you a lot of money, or at least would have you walk away leaving money on the table.”
No one wants to lose money especially when the economic hit is predicted to be worse than the Global Financial Crisis.
Overcoming the fear hurdle
One of the greatest hurdles that may inhibit the recovery of real estate in New Zealand is fear. Not so much about health and well-being, but economic fears.
People may fear to go into deals due to the economic hit.
If you had plans to buy or sell property in New Zealand, you can conquer that fear through support. As CJ puts it “What you really need is to find the right support system i.e. brokers, agents, bankers, accountants, lawyers, that can help you move through your decision-making process as smoothly as possible.”
Fortunately, unlike the Global Financial Crisis period, the financial industry is working to solve the challenge. This will go a long way in calming the jitters and restoring consumer confidence in the market.
To conclude, like previous disruptions, real estate in New Zealand will recover and surge. We may see changes in design rules and perhaps spatial planning. Also, buyers could be wary and more conscious. But as CJ puts it “It’s a great time to set yourself up for the next boom cycle. There are so many different avenues of how to spend your money in real estate. A lot of it depends on what is currently on the market, what is building in the market for the future, and what someone’s personal situation is.”