The country’s Q1 GDP figures confirmed what many suspected, NZ was in a recession at the start of the year. Kelvin Davidson explains what this means for the property market.
The Stats NZ data shows a minor 0.1% drop in GDP in the March quarter, which confirmed a technical recession after Q4’s fall of 0.7%. 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 downwards 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.
Meet Kelvin Davidson
Chief Economist
Kelvin joined CoreLogic in March 2018 as Senior Research Analyst, before moving into his current role of Chief 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.
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