Revised forecast is due to the market's continuous recovery from the COVID-19 lockdown
Kiwibank economists expect house prices to drop by only 6% compared to its previous forecast of 9%, thanks to the market's continuous recovery from the impacts of the COVID-19 lockdown.
In April, Kiwibank economists predicted that the lockdown would increase the unemployment rate by over 10% and house prices would drop by 9%. However, the economists have now become more optimistic after the country ended the lockdown earlier than expected.
Kiwibank economists, led by chief economist Jarrod Kerr, said the regions' performance during the lockdown was better than expected.
“COVID lockdowns barely affected farming, and the ‘working from home’ trend is fuelling demand,” Kiwibank economists said in their report.
“We're simply more comfortable that the downside risks are receding. And that's a massive change in mindset. We continue to expect the unemployment rate to creep towards 9%, but the impact on housing is likely to be reduced.”
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The economists said the impact of the lockdown is far more significant than any economic event since the Great Depression. However, the lockdown did not last long, and the industry remained resilient as banks continue to lend and the “appetite to do so remains strong.”
“If all goes well (big if), a 5% to 6% dip in house prices would represent a very mild reaction to such dramatic economic upheaval,” the economists said.
“At the national level, the housing market is making a vigorous comeback. April's lockdown merely delayed settlements and pent-up demand. Stay-at-home orders meant ‘for sale’ signs were left in the car boot and agents took Sundays off. But the housing market has fired up since leaving lockdown.”
