Construction at the site of the former Tauranga Farmers building. Photo / File
Construction at the site of the former Tauranga Farmers building. Photo / File
First-home buyers could become the unlikely winners out of Covid-19's devastating hit to the Bay of Plenty economy.
But there's a catch, says one of Tauranga's leading developers.
An Infometrics report, commissioned by the Bay of Plenty Regional Council, highlights industries such as construction, retail and tourism as likely tosuffer the most from the impact the pandemic has had on local business activity.
Hours after the report was released last week, construction giant Fletchers announced it was shedding about 1000 jobs.
Classic Builders director Peter Cooney says rezoning land is the key to lifting the region out of a predicted post-Covid-19 slump. Photo / File
Classic Builders director Peter Cooney said "there's no question" construction would be hit hard and the worst was likely still to come.
With no migration and high unemployment figures expected, the property market should expect a slump. And once Government support such as wage subsidies dried up "it will come home to roost", he said.
"We've all gone back to work with a backlog that will take care of us for a few weeks, but once that's up ... four to five months later, you will see a major softening of the market."
Cooney said Covid-19's hit would be similar to that of a slowdown in 2002 and the 2008 Global Financial Crisis. However, the key difference now lay with banks offering low-interest rates, he said.
Last week , banks advertised one-year interest rates from as low as 2.79 per cent.
This gave first-home buyers a "never better" opportunity to get into the market. However, this hinged on more land becoming available, Cooney said.
"If we can create that we will have a steady stream of construction."
Cooney has long lobbied local councils for more land to be made available but the Covid-19 crisis made the need even greater, he said.
"This is a huge opportunity but we need that land to be zoned."
NZ Certified Builders chief executive Grant Florence said there was plenty of work keeping them busy for now but he anticipated a slowdown in four to five months' time.
"Beyond that, I'm not too sure. There will definitely be a big drop but by how much, it's hard to say."
Florence remained sceptical about how many jobs the Government's proposed "shovel-ready" projects would actually deliver.
Tauranga City Council manager of city and infrastructure planning Andrew Mead said the post-Covid-19 benefits from rezoning land had merit but it was not the only answer.
Grant Florence, chief executive of NZ Certified Builders, says he's expecting things to slow down in four to five months' time. Photo / File
"Tauranga's economy is more complex than just property and housing development. There's more we and the Government need to do to help the recovery from Covid. The developers are saying 'let's focus on rezoning new land', that certainly should be part of the mix but we need to balance that with urban intensification."
The council was already in the process of trying to open up land that would result in 3000 homes in Tauriko West and 7000 at Te Tumu but there were "significant challenges", including acquiring investment from Waka Kotahi NZ Transport Agency.
"We are doing all we can to move these projects as soon as possible but we are quite frustrated," Mead said.
"The Government removed the Special Housing Accord legislation, we were hoping to use that to move some of these projects along faster."
On May 3, the Government announced changes to the Resource Management Act to enable faster development in light of Covid-19. The new legislation is expected to be passed in June.
Western Bay of Plenty District Council resource management manager Phillip Martelli said the region was well catered for with sufficient land available for residential development at Te Puke and Ōmokoroa "to meet the needs of the foreseeable demand of the market, and to a lesser extent at Katikati".
OneRoof editor Owen Vaughan says now's a good time for financially secure first-home buyers to get into the property market. Photo / File
"Our main thrust in the short term is to provide more land at Ōmokoroa to cater for the ongoing demand there and to ensure we meet the Government's requirement to have at least 10 years' supply available."
OneRoof editor Owen Vaughan said he did not anticipate Tauranga's house prices dropping as drastically as in other areas of New Zealand because the city was still considered a desirable place to live. However there were benefits to be had.
"Prior to Covid-19, we were starting to see more investors return to the Tauranga market. It's very possible post-Covid that those investors will be more cautious about over-extending themselves, which could have benefits for first-home buyers," he said.
"Historically low interest rates will encourage first-home buyers who are financially secure to enter the market and obviously, the removal of LVRs [loan-to-value ratio restrictions] will perhaps give buyers a lot more confidence, but there should be caution."
Rezoning would help create more stock for the market which would also benefit first-home buyers, Vaughan said.
However, it was likely to become a challenging time for developers and construction, he said.
Smartgrowth chairman Bill Wasley and Carrus general manager Scott Adams could not be reached for comment.
