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One of the advantages which existing home owners have over first home buyers is experience. They will have seen past periods of weakness in our economy and figured out how to get through it – perhaps easing back on mortgage repayments. They have learnt how to ride interest rate fluctuations through spreading their fixed interest rate exposure.
Most of all, they have learnt that as a rule there is no “best” time to buy property and it is wise to simply get on with it as soon as one is comfortable with the debt to be taken on, and then manage changes along the way.
But first home buyers don’t have that experience, and they tend to focus a lot of these following questions when considering how “safe” it is to make their first purchase.
I find it easier to answer no to this question than at any time before in my experience as an economist. Central banks are determined to see their economies recover well over 2021 and 2022 and have all but promised to keep rates low for many years. With mortgage rates already at record low levels this is the best rate environment which any group of first home buyers has faced over the past three and a half decades since deregulation after mid-1984.
Looking across the various measures of the labour market, I estimate that job losses so far might add up to about 30,000, or some 1.1% of total employment. There are some more losses to come for two main reasons. The first is the ending in three weeks of the wage subsidy scheme. In all probability most people likely to be laid off when the scheme ends already know what is coming and have adjusted their spending accordingly.
The other reason is business restructuring which has become increasingly necessary in recent years as our world have changed tremendously since the 2008-09 Global Financial Crisis. But this period of widespread restructuring is actually one reason why my view on job losses over the remainder of this year is a lot better than other economists. Restructuring does not just mean layoffs. It means reallocating people within an organisation, and bringing in people with newly required skills.
So, much as the unemployment rate is set to rise, and home buyers do need to give deep thought to their employment prospects, I see generalised jobs growth as more likely over 2021 than continued job losses.
In Queenstown maybe yes, perhaps also in parts of Southland and locations around NZ with low long-term population growth. But overall, the list of factors underpinning house prices is quite long, including a Kiwi immigration boom, low interest rates, and gearing up of money no longer spent on overseas travel. If prices were going to fall away, they probably would have already done so and while I feel some downside risk of up to an average 5% might remain, come 2021 I expect prices to be once again trending upward.
New listings are rising, but the nationwide stock of listings at the end of July of 21,700 was down 12% from a year ago. A 24% rise in new listings received over the month appears to be getting readily picked up by the many investors and first home buyers in the market.
Despite the economic shock from Covid-19, the housing market remains surprisingly strong with sales in June (latest NZ-wide data) ahead 7% from a year earlier, prices up 8.6%, and with price declines of 1.7% in April and 0.4% in May partially reversed with an average gain of 0.9% in June.
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