New Zealand

NZ recession confirmed but what does it mean for the property market?

What happens next is where the focus will be and is arguably of much greater importance

By CoreLogic NZ Chief Property Economist Kelvin Davidson

The highest-profile economic data released this week was the country’s Q1 GDP figures, which confirmed what many suspected, we were in a recession at the start of the year.

The Stats NZ data shows a minor 0.1 percent drop in GDP in the March quarter, which confirmed a technical recession after Q4’s fall of 0.7 percent. Education, transport, manufacturing, and retail trade were contributors to the latest drop, although other sectors such as construction, IT, and financial and insurance services still managed to expand in Q1.

Even though the figure has made headlines today – it was trending on business and finance news sites in Australia for example – it is “old news”, given that we’re already pretty close to the end of Q2.

And the encouraging view is that some forecasters think GDP will now gradually expand over the next year or two. The labour market has also stayed strong – providing some degree of insulation for the property market.

Indeed, the implications of the GDP figure and Q1 recession for the property market are generally pretty limited. With employment still strong, the confirmation of a recession in terms of economic activity over late 2022 and early 2023 is unlikely to trigger expectations of renewed or further downward pressure for property values.

What happens next is where the focus will be and is arguably of much greater importance.

The lagged effects of previous increases in interest rates are yet to take their full toll on household finances, but encouragingly most analysts now expect the economy to be on a slow but steady growth path from here on. Employment isn’t expected to drop much either, if at all.

In other words, the worst in terms of economic performance may now be in the rearview mirror.

About Kelvin Davidson

Kelvin joined CoreLogic in March 2018 as Senior Research Analyst, before moving into his current role of Chief Property Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.

Kelvin is well practiced in applying macroeconomic trends and data to the property market, both residential and commercial.

In his role with CoreLogic Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly, he always puts more emphasis on providing the key insights and telling a story, whether his audience be clients or the media.

Kelvin holds a Bachelor of Commerce with Honours majoring in Economics from University of Canterbury.

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