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  1. #1
    Join Date
    Jan 2009
    Posts
    209

    Default Economic and property outlook for NZ

    15 hours from now our stage 4 lockdown in NZ ends. Most companies were given 12 weeks pay per employee, so might be no drastic changes for another 8 weeks. Most companies have been closed for 4 weeks so unable to declare bankruptcy, and only a small proportion will reopen tomorrow. There are many businesses who do not have contingencies for 4 weeks downtime, let alone more. Many industries will simply cease to exist, at least for the near future: tourism, restaurants, hotels, casinos, pubs, bars, bricks and mortar retailers, stadiums, airlines and (insert others). NZ is an economy based primarily on tourism and exports of food and forestry. I'm not sure to what extent these export industries have been affected, but it will be negative across the board, so there are likely to be bankruptcies and job losses possibly at a massive scale. Most of these jobs will return eventually, assuming global trade resume. It's possible it doesn't resume at all, or only in part. Tourism is just fubar so I can't see how there won't be a complete collapse of each and every business in tourism. I'd say this sector is unlikely to recover in the next few years, if ever.

    This economic destruction aside, NZ is the best placed country in the world for eradicating the virus entirely, and we may benefit from this long term in many ways. I've written previously about how I predict the NZ population will increase by orders of magnitude due to reduced impacts from climate change. Being the only country in the world to be covid free might be a huge drawcard to the million kiwis living overseas, and the rich who are prepared to pay big money for citizenship. There is discussion about selling citizenship to billionaires who are prepared to invest multi millions in businesses that create NZ jobs.

    While there is universal agreement that the property market will collapse, I disagree. We still have a shortage in NZ, and regardless of the employment situation people still need somewhere to live. I expect that in Australia the 600,000 kiwis will lose their jobs, either naturally or by some executive decision to reserve jobs for Australian citizens. So I expect many of those 600,000 to return to NZ, and they too will need somewhere to live. They might not get employment here either, but at least they are safe from covid and get government assistance and free health care. These 600,000 might have a family, so we could be looking at an influx of several million, which would be a 50% increase in our population. Our infrastructure will not handle even a fraction of that, so many jobs will be created.

    On the other hand, short term many will be unable to pay their mortgage, resulting in mortgagee sales. There will also be far less people able to secure a new mortgage, so prices are likely to take a swift sharp dive, followed by a slow steady recovery as jobs come back. The country is likely to be slowly unlocked by region, depending on new cases, so Auckland is likely to be the last place to get back to normal. In addition, it's likely that people will want more social distancing, meaning less of the city life and more of the country life. Also without jobs to draw people into the city, there won't be the demand for city living. This may result in lower demand for Auckland property and higher demand for satellite cities and towns. In my city of Whangarei, we are going to build a new port, and it's possible Whangarei booms for the next few decades, rivaling Auckland for business, especially in the import / export sector.

    Remember, this is the damage likely in a country that will be covid free. How can other countries fare any better?
    Last edited by crashy; 27-04-2020 at 12:03 PM.

  2. #2
    Join Date
    Oct 2008
    Location
    Auckland/Melbourne/ whereever the money is
    Posts
    1,400

    Default

    IMHO Your reasoning is flawed in so many ways.

    NZ will NEVER be COVID-19 free. It may be able to maintain a low level of incidence but will NEVER be free of it unless the borders are closed completely -nobody in without a 1 month quarantine. Even then someone is likely to get through that shows no symptoms. its just a pipe dream.

    Aus did not SHUT DOWN. A large majority of businesses continue to operate but with social distancing restrictions. (I personally continue to work during the lockdown from home in NZ for an Aus company who has most employees now working from home in Aus) There will surely be a slowdown, but nothing like the devastation that will show up in NZ from the abortion of approach taken by these Communists.

    The 600k NZers in Aus are mostly well established there, many not having much in the way of connections back to NZ any more. In the event of them losing their jobs there, there is a better chance of them getting something else there than here. The difficulty will be income while unemployed. At present, during the pandemic, they can get a benefit, but normally they cant.(and its means tested)

    Do we still have a shortage of property ?
    Shortage of cheap houses for sure, but is there really a shortage of places for people to live, especially with foreign students going home and maybe not allowed back. Overseas seasonal workers having returned home and again likely to have difficulty returning. Tourists not being here.
    Many rental providers that switched to Airbnb due to the rubbish imposed by this Communist Govt will now likely be forced to return their properties to the rental pool or consider selling, an increase in available rentals in the first case but a slight decrease if sold to an owner occupier.

    For those able to finance a purchase, holding costs will be considerably lower than they have been (low interest rates), but the chances of very much higher income taxes (and other taxes such as GST) are high, so the percentage of net income to housing expenses will probably end up being around the same as now.

    With the devastation that will soon start showing up in so many industries as you note, many people will choose to move to Aus where their chances of getting a job are better and the cost of living is considerably less. (Petrol has currently dropped to below $1 per ltr, it was $1.35 - $1.50 6 weeks ago, rents are much less than in NZ, as are average house prices in most areas)

    My pick is low volume property sales, slight drop in average price (5 - 10%), despite removal of LVR banks will be very fussy about who they lend too, in what industry they work, whether self employed or employed by large corporate (small company employees likely to have difficult time demonstrating the long term viability of the company they work for)
    Last edited by Keithw; 27-04-2020 at 01:52 PM.

  3. #3
    Join Date
    Jan 2014
    Posts
    1,035

    Default

    Quote Originally Posted by Keithw View Post
    IMHO Your reasoning is flawed in so many ways.

    NZ will NEVER be COVID-19 free. It may be able to maintain a low level of incidence but will NEVER be free of it unless the borders are closed completely -nobody in without a 1 month quarantine. Even then someone is likely to get through that shows no symptoms. its just a pipe dream.

    Aus did not SHUT DOWN. A large majority of businesses continue to operate but with social distancing restrictions. (I personally continue to work during the lockdown from home in NZ for an Aus company who has most employees now working from home in Aus) There will surely be a slowdown, but nothing like the devastation that will show up in NZ from the abortion of approach taken by these Communists.

    The 600k NZers in Aus are mostly well established there, many not having much in the way of connections back to NZ any more. In the event of them losing their jobs there, there is a better chance of them getting something else there than here. The difficulty will be income while unemployed. At present, during the pandemic, they can get a benefit, but normally they cant.(and its means tested)

    Do we still have a shortage of property ?
    Shortage of cheap houses for sure, but is there really a shortage of places for people to live, especially with foreign students going home and maybe not allowed back. Overseas seasonal workers having returned home and again likely to have difficulty returning. Tourists not being here.
    Many rental providers that switched to Airbnb due to the rubbish imposed by this Communist Govt will now likely be forced to return their properties to the rental pool or consider selling, an increase in available rentals in the first case but a slight decrease if sold to an owner occupier.

    For those able to finance a purchase, holding costs will be considerably lower than they have been (low interest rates), but the chances of very much higher income taxes (and other taxes such as GST) are high, so the percentage of net income to housing expenses will probably end up being around the same as now.

    With the devastation that will soon start showing up in so many industries as you note, many people will choose to move to Aus where their chances of getting a job are better and the cost of living is considerably less. (Petrol has currently dropped to below $1 per ltr, it was $1.35 - $1.50 6 weeks ago, rents are much less than in NZ, as are average house prices in most areas)

    My pick is low volume property sales, slight drop in average price (5 - 10%), despite removal of LVR banks will be very fussy about who they lend too, in what industry they work, whether self employed or employed by large corporate (small company employees likely to have difficult time demonstrating the long term viability of the company they work for)
    Agreed Kieth, This government has done us over, Australia continue to work!
    "Remember, people will judge you by your actions,not your intentions.You may have a heart of gold -but so does a hard-boiled egg".

  4. #4
    Join Date
    Apr 2005
    Posts
    2,943

    Default

    Quote Originally Posted by Frezzinghot View Post
    Agreed Kieth, This government has done us over, Australia continue to work!
    Are you all right?

    This whole thought process of yours is pretty irrational.

    You might have a thought worm.

    See if you can find it , identify it, figure out how it got into your head, and what it's feeding on.
    (usually fear or hate).

    People are people, "isims" are not real
    The selfish and the greedy will pretend to support them to use them to get what the crave.

    All a bit sad really.

    fyi.

  5. #5

    Default

    More reasonable summery. My thought is like this.

  6. #6
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    15,487

    Default

    Crashy - companies don't go bankrupt. Individuals do.
    Companies go into receivership or liquidation.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  7. #7

    Default

    Interesting views, hard to imagine!
    Who could imagine that a Flu outbreak end up in a pandemic? Apart of the orchestrating mainstream news if you did your own research you would have compared the war on Covid-19 with Flu outbreaks over the last 10 years and the results. NZ hasn’t experienced such economic destructions before and what are the options to squeeze and shift each Dollar from working people to pay for enormous consequences? – Inflation, GST increase, CGT, Wealth tax, Inheritance tax… maybe I’m mislead by fantasy, too.

  8. #8
    Join Date
    Apr 2004
    Posts
    836

    Default

    To think we will have billionaires line up to come to NZ to build businesses that will employ any meaningful numbers is pure dreamland ... more wealthy retirees yes I could see that but the reason many people in this world are billionaires is because they have manufacturing in third world locations with slave labour not NZ high reg costs high min wages .. see India , Asian also this is where all the new billions pop of buyers live not little old NZ close to markets etc..

    our only hope too grow economically is through primary industry aka fishing aquaculture (we have one of the largest economic ocean ownerships to population in the world ) farming , forestry , mining nz has some great gold prosperity but tourism was always been put first ... Doing this going forward will be putting the cart before the horse ... we need to stop borrowing billions trying keep businesses alive they survive on mass tourism but instead put billions into a major state project like another power plant In the South Island that not only we could use the cheap power for another Tiwai type plant but Will also bring fresh water from westcost alps highest rainfall to the dry barren central plains of the South Island in turn adding thousands of hectares of useless land to productive sheep,beef ,horticulture etc ... we must diverse away from far too much dairy farming in NZ
    Last edited by JBM; 29-04-2020 at 08:43 AM.

  9. #9
    Join Date
    Apr 2018
    Posts
    260

    Default

    Quote Originally Posted by Keithw View Post
    IMHO Your reasoning is flawed in so many ways.

    NZ will NEVER be COVID-19 free. It may be able to maintain a low level of incidence but will NEVER be free of it unless the borders are closed completely -nobody in without a 1 month quarantine.
    To be honest I thought that WAS the plan, there is talk about opening borders with Aus, but Aus will have to get down to the same level of low incidence that NZ has produced, which they are far away from.

    The articles I read have said basically due to NZ going into a full quarantine situation it will be able to move to a full domestic economy within weeks of going back to level 2, where Australia took a much more lenient policy on level 4 and it could see them take 6-9 months to return to full domestic production. That's how long I expect it to take before Aus is compliant enough for NZ to take a risk on them.

    I do agree with your overall opinion though that we will not eradicate it, but where Aus will be on and off lock down, NZ is in a solid position now with its tracing system to keep the incidence to 1 every second day for as long as we need. I believe there is a number the tracking system needed to reach which is part of why the government was stalling the opening of our domestic economy. Something like 100 people from each case (don't quote me its just a number the system uses, that's just an example).

    Another opportunity pending as a big GDP boost, that is a personal choice and should be treated as such, Cannabis. It has the potential to add about $250m to the GDP. Not to be sneezed at. That is my understanding. The problem is there is not education out there and elderly, especially national voters, just don't understand it and seem to still believe the Nixon and rubbish of 60 years ago using propaganda when he had no scientific understanding back then of the obvious benefits and how overly anxious his rhetoric had made some people. Some people still think a few eggs a day is bad for you.

    Im hoping Labour, Greens and Helen Clark foundation (who is in a UN Drug Advisory role) will start advertising and educating soon to debunk some of these absurd ideas around this medicinal plants recreational and medicinal use in a modern scientific environment. ie Cannabis smoke is like tobbaco smoke, ok just make something up. In fact it is a bronchial dilator and often prescribed for asthma. Most people will vaporise the flower now days anyway. And this is just one of MANY silly urban myths around what is now a pharmaceutical.

    I could be wrong but that's my 2c as an unqualified opinion that should not be quoted or relied upon for being accurate :-).
    Last edited by OnTheMove; 05-05-2020 at 08:11 PM.

  10. #10
    Join Date
    Jan 2009
    Posts
    209

    Default

    Here is the forecast I made for Christchurch after the earthquake
    https://www.propertytalk.com/forum/s...ht=#post247341


 

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