Last week, New Zealand started lifting its lockdown restrictions, kickstarting its frozen housing market. Transactions that were on hold are now completing (or “settling”, as it’s known), and buyers can view homes.
There are some positive signs: Kiwi buyers were browsing during lockdown and activity is picking up quickly. Bryan Thomson of Harcourts, a New Zealand estate agents, said: “One of our agents sold two properties to cash buyers on the second day after lockdown lifted.”
Sellers are also bringing more homes onto the market, he added. But these come with big discounts. Vendors have been slashing their listing prices by up to 10pc, said Mark Harris of estate agency Sotheby’s International Realty. It’s not a universal price drop, “but those are the properties seeing the most activity”.
Among buyers, “there’s been a little bit of that vulture attitude,” Mr Harris added. In the 12 months after the global financial crisis, house prices in New Zealand fell on average by 7pc over 12 months, said Mr Harris. He is expecting something similar this time around.
Will Britain follow the Kiwi lead?
The two countries have very similar housing markets. London and Auckland (the centre of New Zealand’s market) rank 37th and 38th place respectively in estate agency Knight Frank’s most recent global prime cities index for house price growth.
Both markets have been on a similar trajectory, with both cities pulling down national house price growth. Then, at the end of 2019, activity bounced in both countries. Auckland price growth turned positive in November, while a month later British estate agents began to hail the “Boris bounce” in the wake of our general election.
The trend continued into the new year. In March, UK house prices were up 3.7pc year-on-year, according to the latest Nationwide house price index, the highest rate of growth since February 2017. Auckland price growth in March was 11.1pc, the highest since January 2017.
So on the surface, it looks like our market should broadly follow the same patterns that will unfold in New Zealand.
Except the Antipodean isle has some tricks up its sleeve that we should learn from.
No stamp duty, and few overseas buyers
In October 2018, New Zealand introduced a ban on foreign purchases of existing properties (the new-build market is exempt, as are Australian and Singaporean buyers).
Kate Everett-Allen of Knight Frank said: “The fact that the market is less dependent on foreign buyers means it is better insulated.”
Domestic demand will come back first in most countries, she added. International interest will be slower to recover as it will be dependent on lifting travel restrictions, and recovery in more than just one country.
In this sense, Auckland is in a better position to recover than London. Non-New Zealand residents accounted for just 1pc of the region’s property sales in 2019, according to Government statistics (down from 5.6pc in 2018). By contrast, in the second half of last year, international buyers accounted for 26pc of Greater London sales, according to estate agency Hamptons International.
There are also fewer barriers to home purchases in New Zealand. There is no stamp duty, the transaction tax that British agents are calling to be reduced to help the British housing market.
Instead, New Zealand is kickstarting activity by easing restrictions on lending for at least 12 months.
Previously, banks could grant only one fifth of residential mortgages to buyers with deposits of less than 20pc. Now, these restrictions have been lifted to stimulate the market and help first-time buyers.
Meanwhile, British buyers will be held back by the massively reduced mortgage offering for people with low deposits.
There are two areas in which Britain could fare better. Firstly, New Zealand’s economy is more reliant on the travel industry, so resulting unemployment will likely filter through to buying power.
And second, in Auckland, new-build homes were already “very difficult to fund”, said Mr Thomson. The foreign buyer ban and tightening of anti-money laundering laws had dampened international investment and construction costs were exceptionally high. Many materials needed to be imported, a problem that was compounded by unfavourable exchange rates.
While British housebuilding is under serious pressure, the sector was in a better way before the pandemic struck.
Tech bros to the rescue
Coronavirus has had an unexpected side effect: the country’s Lord of the Rings landscape means it became well-established as the apocalypse bolthole heartland of Silicon Valley before the foreign buyer ban.
Now, the Government’s swift handling of the pandemic and the country’s status as a safe haven mean its expats are coming home to roost.
Agents are reporting an uptick in inquiries from expat New Zealanders who now want to return home. They account for a third of inquiries, said Edward Pack of estate agency Bayleys Real Estate, Knight Frank’s associate. “Maybe they had intended to come back in three or four years,” said Mr Pack. “Now some are saying I will be back by Christmas.” He has just sold a NZ$5m (£2.4m) property to a family newly returned from New York.
Source : The telegraph