Heading into the Global Financial Crisis of 2008-09, there were 58,000 properties listed for sale on www.realestate.co.nz. Heading into the current downturn listings were only 19,000 in February. Turnover was constrained not by a lack of buyers, but by a lack of stock – of sellers.
As we have gone down through the Alert levels, we have seen buyers re-enter the market, but in some quarters, there have still been predictions of big price falls. But what these pundits have failed to take into account is 2 key things:
First, few sellers are pressed to bring their property to the market because of pressure on household cash flows. The majority of people losing their jobs during this downturn are in low wage sectors such as tourism, hospitality, and retail, and many are on migrant visas. Few are home owners – but some are. In addition, mortgage interest rates have fallen to record lows, and mortgage deferral assistance is being offered by lenders.
Second, buyers remember the shortage of listings and the numerous calculations and discussion of shortages of stock in our main centres. There has built up over the past few years a queue of frustrated buyers hoping that something would come along and give them greater opportunity to make a purchase. Because they have been looking for so long, they are generally in a good financial position.
These buyers are still there, and increasingly, they are revealing themselves in the market after stepping back for 2-4 months to see how the Covid-19 crisis would affect things. What they are seeing is that our economy has moved down through the Alert levels at a far faster pace than anyone imagined.
They are seeing sharemarkets rally almost back to where they were before the crisis. They are seeing job numbers go back up again much, much sooner than anyone anticipated in the United States and Canada these past few days. They are revealing themselves to be feeling more confident, and through two surveys at least, are telling us they are back in the real estate market.
The Survey reveals that licensed real estate agents can see this strength as well. A net 55% of agents say that they are seeing more first home buyers in the market. A net 25% say that they are seeing more investors.
The upshot of examining both the demand and supply sides of the real estate turnover equation is this. Demand is still there, with more investors and first home buyers hoping to make a purchase in the near future, offsetting the backing away of some people whose income positions mean they have had to put purchase plans on hold.
On the supply side, numerous factors tell us listings will not surge, but experience during the GFC tells us they will not collapse.
In the end, the chances are now looking very low that residential real estate turnover will fall by anywhere near the 40% we were thinking was possible when the virus shock first hit – principally because the buyers are still there.
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