COVID-19 hasn’t significantly undermined the property market so far

In this fast-moving COVID environment it’s easy to lose track of everything that’s changed since the end of March and how the property market has been
impacted.

Recall that since March:

  • The Government has launched a huge fiscal support package, including the wage subsidy, which has kept people in jobs and paying their mortgages;
  • The Reserve Bank has cut the official cash rate to 0.25% (and it could go negative in early 2021), delayed the new bank capital requirements rules,
    embarked on an asset purchase programme of $100bn, and temporarily removed the loan to value ratio speed limits;
  • The trading banks have shown considerable latitude with borrowers, including extensions to loan terms, switches to interest only payments, and full-scale
    mortgage payment deferrals

Back in the dark days of April, you’d be forgiven for fully expecting that all of this – rising unemployment and economic recession included – would cause
property sales to collapse and house prices to fall. In reality, sales activity did slump in April, and it’s probable that we’ve ‘lost’ some sales
altogether – the total for the first seven months of 2020 (44,371) is about 5,700 less than the same period last year (50,111). Even so, volumes were
still much more robust in June and July alone, and property values have largely been unscathed so far (apart from Queenstown, and some of the more
expensive areas of Auckland).

Indeed, perversely for these troubled economic times, the property market effects of COVID-19 haven’t been as significant as they might have been. Why
is that? The obvious factor has been the sharp falls in interest rates, both for borrowers and savers. On the borrowing side, the...