Money, Jeremy Tauri: How will house prices be affected?

Jeremy Tauri is an associate at Plus Chartered Accountants.

There seems to be widespread acknowledgement that the property market will feel the impact of the Covid-19 downturn this year.

One of the big drivers of property activity is confidence. If you're not confident that you're going to keep your job, or that your business is going to survive, you're much less likely to be willing to splash out on a new house.

Property research provider Corelogic is now predicting a drop in turnover by anything up to 25 per cent over the rest of this year. Some price weakness should follow. But how much depends where in the country you are.

Places such as Queenstown will suffer more of a downturn than those that don't rely so heavily on tourism. It's estimated that about 20 per cent of Queenstown's economy relates to accommodation and food services, which are going to suffer significantly while our border remains closed..

All this crystal ball-gazing might have you wondering what it means for your planned property moves.

If you're buying a home to live in, the answer is probably: not a lot. It's very hard to time the market and if you hold out for a market drop, or a drop that you deem big enough, you might find that you leave it too long and miss your chance. If you hold off selling, expecting things to pick up soon, you might find they don't and you're stuck facing a worse proposition.

When you buy and sell in the same market, how it's moving doesn't mean a lot — so you can probably carry on no matter what prices are doing. If you're a first-home buyer, you are most likely making a long-term decision that will see you ride out several property upswings and downturns.

Whether you can pay your mortgage comfortably will be a more important decision than whether prices might drop 5 per cent in the next few months.

Understand why you're making the property decisions you're considering and how they fit into your long-term plan. Then stay the course — with every downturn, there's always a recovery coming on the other side.

Jeremy Tauri is an associate at Plus Chartered Accountants. www.plusca.co.nz