In New Zealand, building activity was already very strong going into the crisis.
Post-lockdown, the construction industry has been grappling with capacity constraints and a further increase in demand.
Housing spending and confidence has also been supported.
That boost in momentum for these pockets has helped to offset underperforming industries like tourism, retail, and services where conditions are more difficult, and could worsen from here.
These same offsets have been evident in other countries, though to smaller degrees.
That reflects the challenge other countries have in offsetting the impacts of longer lockdowns and greater social and economic disruption.
Globally, governments have also embarked on a synchronised fiscal policy response too.
Fiscal policy is providing financial support for those whose livelihoods and jobs are being affected by the crisis, though the size and impact of this has varied by country.
To the extent that policies have supported incomes, these measures have helped cushion global housing markets.
NEW ZEALAND’S HOUSING MARKET HAS HAD ADDITIONAL SUPPORT
In New Zealand, fiscal measures to support incomes have been particularly potent, in part due to the relatively short duration of our lockdowns.
These measures included the wage subsidy, COVID-19 Income Relief Payment, and other measures to support affected businesses and workers.
These policies were expensive and unsustainable on a long-term basis. However, they were able to smooth household incomes through the lockdown phase of the crisis and keep people in employment.
The net effect has been the avoidance of a vicious feedback loop in which incomes, employment and spending could have plummeted and been more permanently affected.
With incomes largely intact, the economy was well positioned to bounce back when the restraints were removed.
So far, New Zealand has seen a swift recovery in GDP from lockdown-induced disruption (figure 4), with fewer job losses than in other countries (figure 5) – contributing to the stand-out performance of New Zealand’s housing market.
Income support, the fall in interest rates and mortgage deferment schemes all worked in tandem to shore up cash flow and confidence, supporting housing demand and spending more broadly.
Overall, these policies have been more effective than expected – proving an effective stop-gap. That reflects a successful health response and rather generous schemes being in place.
We haven’t come out completely unscathed. Some firms and workers have endured tremendous challenges resulting from the closed border. And we are not out of the woods yet.
Figure 4. GDP levels (Q4 2019= 100)