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Source: MIL-OSI Submissions
Source: CoreLogic

The New Zealand property market had been strengthening over the first quarter of 2020, but of course the alert level 4 lockdown introduced in late March then saw the market dry up. From Tuesday, however, activity should rebound.

Over the first couple of months of 2020, the property market had been strengthening, with sales volumes rising and value growth accelerating, notably with Auckland and Christchurch turning a corner. However, from the level 4 lockdown on 25th March the world has obviously changed and the property market has largely shut down.

Real estate activity will start to recover again as we (hopefully) move back down through the alert levels over the coming months, but the recession and rising unemployment rate both point to a much more subdued property market than otherwise would have been the case. Our working assumption is that sales volumes are 15-20% lower in 2020 (about 70,000) than they were in 2019 (about 85,000).

In terms of the economic backdrop, the outlook is tough. GDP is expected to fall by about 6-7% this year and the unemployment rate to more than double from 4% to even as much as 10%. However, the size of the government support package (more than $20bn across wage subsidies, wider fiscal package such as extra health spending and business tax changes, and business finance guarantees), the measures taken by the Reserve Bank (official cash rate of 0.25% for the next year at least, delaying of extra capital requirements for banks, and quantitative easing), and support from the retail banks (such as mortgage payment deferrals) are all reassuring factors.