Well done NZ!

Well Done NZ!

As a nation, we have benefited from our geographical separation, decisive leadership and the general Kiwi approach to life, which in turn has insulated us from a full on Covid-19 assault to our health system. Without intending to sound smug, and respecting the fact that this isn’t over, we all know that NZ is a pretty good spot to be right now. But perhaps more importantly, so does the rest of the world.

If we cast our minds back to earlier this year, we were all witnessing record turnout to auctions and sales prices that pushed well beyond the somewhat arbitrary reference point that is the Capital Value. The media was constantly proclaiming to the nation that the market was hot and having attended several auctions myself, (and missing out every house I liked), I would have to agree.

People were moving forward, purchasing real estate with conviction and participating in what felt like a frenzy, presumably spurred on by the obvious lack of supply within the market.

Fast-forward a few months, and while we all accept that the world has changed, it’s difficult to understand exactly what this might mean for real estate investment. Could Covid-19 have simply eradicated the housing shortfall and affordability crisis? Had it even managed to disprove the fairly robust relationship between supply and demand?

While there is no doubt that the NZ economy, is heading into uncharted territory, I think we need to stop, take a breath and look at the fundamentals.

NZ as a country is safe and secure, with clean air, a stable government and it offers a fantastic lifestyle that cannot be replicated easily elsewhere. We’ve all read the articles on billionaires retreating to NZ in their private jets, simply flicking on the evening news will provide you with another handful of reasons why it’s good to be here.

Focusing on the current global pandemic, if we dissect how it’s being handled elsewhere and then follow that through to a logical conclusion, it is reasonable to expect that more people will be considering a move to NZ in the very near future.

In addition to this international interest, our population has been steadily growing for quite some time, reaching 5 million earlier this year. And I can only imagine the number of foreign students that will choose to study in NZ or people that will seek out a working holiday in NZ a little further down the road.

Despite the inevitable increase in demand through oversees interest and population growth, the supply to the market of new housing options will decrease. We are already seeing projects parked as a result of the general tightening of the ultra-conservative financial sector. Remember, supply was short before Covid arrived, and further tightening of supply has already started. The big issue with a reduction in supply is that while this tap can be turned off very quickly, it takes a considerable amount of time to turn it back on. By the time we remember that there remains a huge shortage, and that we’re in a housing affordability crisis, design, permitting and construction will ensure we are 3+ years from any meaningful solution (more supply).

If you’re secure in your employment, right now may very well be the best time to buy, with interest rates at an all-time low, recent lowering of loan to value ratios, competitive pricing, supply about to drop off and demand poised to increase.

Doom and gloom serves as a more captive headline than cautious and well-considered optimism. Don’t wait for the media to pick up on this narrative, it will be too late. Seek to understand your current position, the reasons you might want to purchase and then do something about it today.

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