Mortgage holiday and business finance support schemes to cushion COVID impacts

The Government, retail banks and the Reserve Bank are today announcing a major financial support package for home owners and businesses affected by the economic impacts of COVID-19.

The package will include a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from COVID-19.

The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy through this unprecedented time.

“We are acting quickly to get these schemes in place to cushion the impact on New Zealanders and businesses from this global pandemic,” Finance Minister Grant Robertson said.

“These actions between the Government, banks and the Reserve Bank show how we are all uniting against COVID-19. We will get through this if we all continue to work together.

“A six-month mortgage holiday for people whose incomes have been affected by COVID-19 will mean people won’t lose their homes as a result of the economic disruption caused by this virus,” Grant Robertson said.

The specific details of this initiative are being finalised and agreed urgently and banks will make these public in the coming days.

The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks ‘core funding ratios’ from 75 percent to 50 percent, further helping banks to make credit available.

We are announcing this now to give people and businesses the certainty that we are doing what we can to cushion the blow of COVID-19.

The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis.

This scheme leverages the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the COVID-19 pandemic.

The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates.

The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.

Reserve Bank Governor Adrian Orr, said: “Banks remain well capitalised and liquid. They also remain highly connected to New Zealand’s business sector and almost every household in New Zealand. Their ability to extend credit to firms to bridge the difficult times created by COVID-19 is critical and made more possible with today’s announcements. We will monitor banks’ behaviour over coming months to assess the effectiveness of the risk-sharing scheme.”

The Government, Reserve Bank and the Treasury continue to work on further tailor-made support for larger, more complex businesses, Grant Robertson said.

– from the office of Grant Roberton, Finance Minister of New Zealand.

Coronavirus: House sellers, buyers face derailed or delayed sales

The Real Estate Industry and the Law Society are scrambling to find solutions for people whose house sales have been derailed by the Covid-19 lockdown.

In most deals, the seller of one house is the buyer of another, and that vendor is looking to buy another, so a last-minute failure of just one sale can trigger a chain reaction which affects large numbers of people.

In some cases, people will be unable to move into the houses they have bought and the vendors will be unable to move out, due to the lockdown and in others it will not be possible for anyone to do a pre-settlement inspection.

Some 6694 properties were bought or sold over four weeks in February.

Harcourts managing director Byran Thomson said common sense would have to apply. He said people could mutually agree to defer final transfers until the crisis passed.

Similar solutions would apply to the rental market, where people had agreed to lease a property but could not move in.

The Real Estate Institute later provided figures that gave a rough indication of the size of the problem.

“By looking at the last three years of settled sales between 26 March and 23 April, we can expect that there may be around 5,800 properties due to settle during the New Zealand Alert Level 4 lockdown period,” Bindi Norwell, chief executive at the Institute said.

This included 1485 properties in Auckland, 801 in Canterbury and 699 in Wellington.

The total number for New Zealand is 5781. Otherwise, the rent might still have to be paid, even though the tenants could not move in and were stuck with rental payments for their present flats.

Thomson said it was a more difficult problem than any that had been faced by the industry before, so protocols being developed by the Law Society and the Real Estate Institute would be very welcome.

A spokesperson for the Real Estate Institute said her office had been overwelmed with calls from buyers, sellers, tenants, real estate agents and others who were desperate for a solution to their problems. – all the above content is courtesy RNZ

REINZ: potential impacts of COVID-19 on the housing market

Whilst it is too early to understand the full extent of the impact of COVID-19, broadly speaking, in times of economic uncertainty people can tend to take a wait and see approach to the housing market, which is what could happen with COVID-19. As a general rule, house prices tend to either hold or have a slight dip and volumes tend to fall as people take that wait and see approach.

Hindsight is our only accurate measure but looking at a past recession period which had a global reach, the Global Financial Crisis (GFC) provides for some comparatives. Looking at the data from that time showed the following effects on the housing market from a price perspective.

“One year after the GFC started, median house prices across New Zealand fell 5.9% year-on-year. Whilst the recession technically lasted till June 2009, prices started rising again after January 2009. In the year ending January 2010, median prices increased 9.4% and were sitting $10,000 above where they were in January 2008 when prices started falling highlighting that the market did recover reasonably quickly.

The reality is that people always need to buy and sell houses – people might be moving for a new job or upsizing for family reasons, so we don’t expect the market to come to a complete stop.

Part of the impact on the housing market will also depend on the level of unemployment going forward so we’ll be keeping a close eye on that, but with the Government’s economic stimulus package due to be announced today, we’re hoping that will have some positive effects for people impacted by job losses/reduced hours as a result of COVID-19.

We’ve also had yesterday’s rate cut of 75 basis points which Treasury hopes will provide further stimulus in the market, especially now all of the banks have passed the full rate-cut on.

We’ve had no significant feedback from our members, as of yet, that people aren’t buying and selling as per usual, but it’s still relatively early days. Most questions we have had are around health measures such as signage at open homes or providing access to hand sanitiser.

We’ll be watching the Government’s announcement later in the week around smaller gatherings and be communicating with our members as to any changes they need to make to auctions, open homes or rental viewings. We’re urging people to keep calm and take financial advice where they need to.

However, what is different this time is that the use of technology may have a significant part to play in how the housing market can try and continue in a ‘normal’ fashion. For example, open homes or rental property viewings can utilise options such as video walk throughs or virtual reality tours. With auctions, people have the ability of phoning in or even bidding online through registered apps, so it will be interesting to see how both the real estate profession and members of the public embrace new technology in these unprecedented times.

– Bindi Norwell, Chief Executive at Real Estate Institute of New Zealand (REINZ)