FIRST WORD FROM TOMMY’S REAL ESTATE
Some would say the real estate market is fickle! History tells us that over the years there have been highs and lows in the market dictated
largely by supply and demand and of course the availability of finance and the cost of borrowing. There are many other influencing
factors also contributing to the cyclical nature of real estate, none more so than COVID-19. Market fluctuations are generally expected
though, and accepted by homeowners and property investors. Most property owners will agree with Tommy’s ongoing message that
owning real estate should be viewed as a medium to long term venture which allows property owners to ride out the troughs in the
market and reap the benefits of capital gains in the longer term.
Tommy’s has thousands of clients that we have
guided into homeownership over the last 20
plus years. These people have in most instances,
subscribed to this medium/long term mantra
and many have accumulated extensive and
highly profitable property portfolios. Following
the coronavirus lockdown period, there was
a lot of second guessing as to what trends
would emerge from the gloom surrounding
the economy with many reputable economists
and market commentators predicting a drop in
residential property values by perhaps as much
as 10%. This may be the case in some locations
but from our perspective at Tommy’s, significant
price reductions have not been apparent from
our sales in the Wellington City and suburbs.
The Real Estate Institute’s 30th June Market
Confidence Report stated, “May revealed that
the number of properties sold has progressively
increased throughout the month and listings
showed solid signs of starting to return to more
normal levels. The number of properties sold
nation-wide during May increased steadily
throughout the month from 355 in the first
seven days of the month, ending with 1372 sales
in the last week of May.” June statistics are not
available at the time of preparing this article
but the May trend is likely to continue despite
the fact we are now in the middle of winter, a
time when we normally expect some reduction
in market activity.
Tommy’s remains optimistic about the NZ real
estate market and particularly in our favoured
Wellington market place. However, we are not
blind to the fact that the shadow of coronavirus
still looms over us with a number of scenarios
yet to unfold that may have an impact on the
future well- being of the real estate market
and the wider economy. In our view, the next
few months will give a clearer indication of
how serious the long term effects of the virus
will be for New Zealand. We see the following
issues as being critical considerations that
will determine the prosperity of the country
and its people over the next few years.
• We are only a few weeks away from a
general election. Historically home buyers
and sellers are known to ‘sit on the fence’
in the lead up to an election so this may
impact on the level of real estate sales.
Conversely, the major parties are likely to
be offering new housing packages that
attract votes.
• Wage subsidies are coming to an end and
this will have a bearing on ongoing job
retention for many. Real estate activity
is likely to suffer if large numbers of
employees are faced with redundancies.
• Unemployment is already a serious issue
and may get worse. 1000+ jobs lost at
Tiwai Point is a classic case of how a
family’s life can be turned upside-down
overnight. This will have a huge impact on
the Southland economy with many likely
to seek employment elsewhere.
• Mortgage holidays all have a finite term.
They have been a saviour for many
homeowners but retention of homes for
some once the mortgage holiday is over
will hinge on continuing employment.
• With an ageing population there is an
increasing need for more retirement
village and rest home accommodation. It
is understood that the current rest home
population in New Zealand is around
45,000 and it is reported that the ‘Big 6’
retirement village operators are in the
process of planning or building a further
11,900 units. This will free up a significant
number of existing homes and will assist a
marketplace that is still a long way short of
supply meeting demand.
• Large numbers of Kiwis are returning
home from overseas. While many of these
people will have gained qualifications
and work experience overseas that will be
beneficial in the work place, they will add
to the competition for employment and for
an already short housing supply.
• During and subsequent to the lock down,
Tommy’s has negotiated the sale of a
number of yet to be built apartments
from plans and specifications. This is a
market that is popular for those seeking
an inner-city lifestyle and also offers an
opportunity for first home buyers. Paying
a deposit now and waiting for building to
be completed in 1 to 2 years’ time also has
the advantage of providing more time to
save funds thereby reducing the amount
of borrowed finance.
There is no disputing that we are in changing
times and the impact of COVID-19 will be
apparent for some time to come. Some
businesses are recovering more quickly than
was expected, but for others it will be a slower
and more painful process. For anyone in the
market to buy, sell or rent a home and needing
guidance, Tommy’s invite you to give us a call
without obligation. We are here to help.
Best Wishes,
Tommys Real Estate Ltd.