There are also concerns around the heavily depleted COVID recovery fund
Budget 2021’s house price forecast was good news for first home buyers, but it failed to address the growing need for investment into business, according to Nest Home Loans director Jeff Kerwin, who said that mortgage advisers may need to plan for a tough road ahead if housing market predictions hold true.
Kerwin said that while the unemployment forecasts looked encouraging, there was “absolutely nothing in the budget that directly benefitted businesses in general,” and mortgage brokers might end up “bearing the brunt of a bearish housing market.”
“From a broker perspective, there is nothing in the budget that is screaming out ‘we are taking the housing crisis seriously’,” Kerwin said.
Read more: Budget 2021 revealed: where is the money going?
“A great boost is for Māori housing, and I’m really glad to see some investment in Māori and Papakāinga. While this won’t affect the broker industry, it will have a great social boost for Māori.”
“The Treasury forecast is a 17.3% increase in house values for 2021, but dropping to 0.9% in 2022,” he continued.
“If this holds true, I’m sure the government will take this as a win for the extended bright line test and non-deductibility of interest costs for rental properties. The flip side of house prices stabilising is first home buyers get some breathing space to enter the market, which is great. This runs in line with the Government’s theme of closing the gap in inequality.
“Where I think the budget falls over is the investment for businesses. The $62 billion COVID response and recovery fund has been depleted to a measly $5.1 billion in the space of 12 months. This concerns me significantly as we are not out of the woods with COVID-19, but the allocated funds are nearly gone.
“What further concerns me is the suggestion of reopening the borders further in January 2022.”
Kerwin said that it is hard to predict what the global COVID-19 situation will look like in 2022, but another lockdown could be disastrous for businesses - and with the COVID recovery fund significantly depleted, government assistance may not be as forthcoming.
With regards to the housing market, Kerwin said that we may yet see more levers being pulled – and, if this happens, the mortgage adviser sector may be among the most negatively affected.
Read more: Budget 2021: “a bit of a non-event for the property market”
“The housing market outlook looks strong for 2021, but the government is pulling many levers to quell demand, and I believe we haven’t seen all the levers yet – there is more to come, and this may take effect in 2022 if Treasury forecasts hold true,” Kerwin said. “Already struggling mortgage brokers may bear the brunt of the bearish housing market.”
“We can also roll in the mix the increasing compliance coming from the new FAP regime,” he added.
“This could translate to less mortgage transactions occurring via a diminishing housing market, and increased operating costs due to increased compliance and staffing costs (higher minimum wage, more holidays, etc.). It could mean we could have a tough outlook for mortgage advisers ahead, and it would be prudent for brokers to plan for this.”
