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Positive Prospects For Landscaping



The Covid-19 lockdowns halted most of our economy instantly, while global travel restrictions have removed international tourism for at least the near future. Tony Alexander digs into why the economy is still performing much better than expected and considers what happens next


I’ve been working as an economist back in New Zealand since the middle of 1987 – returning just before the share market and commercial property market crash of that year. Crashes can happen now and then and when they do, the outlook for one’s economy can turn on a dime with huge changes in fortunes for particular sectors.

This sort of thing happened not just with the 1987 crash, but to a much lesser extent with the recession in the early-1990s caused by United States weakness and high NZ interest rates. And again, later that decade, when high interest rates, drought and the Asian Financial Crisis all struck together.


Then there was the Global Financial Crisis from late-2008, although our economy was already in recession by the time that happened, again because of high interest rates.


This time around, we have already had a recession in our economy as a result of the Covid-19 global pandemic, and we are now out of it. Based on previous recessions, the expectation of all of us in March was that most sectors of our economy would experience downturns similar to perhaps some broad average of the previous four events.


Defying Expectations

But frankly, there may not be a single sector performing how we would expect during a typical recession. For a start, there are some sectors doing phenomenally worse than we have ever seen before. In this group, we have inbound tourism, accommodation, entertainment, aviation, and hospitality.

But more interesting is the large group of sectors doing much better than perhaps any sane person thought possible back in March. One such group involves the manufacturers and distributors of what we call durable

consumer goods. These are things which last a long time and which we can put off buying if worried about our immediate future, or accelerate purchases if we suddenly see good times ahead.

In all previous recessions, our purchases of such things as couches, electronic equipment, domestic travel, spas, pergolas, and landscaping services have declined. This time around, the opposite is happening. Freed from our seven-week lockdown in May, we consumers embarked on a unique buying binge of all things which make our homes more comfortable to be in.


We have splurged on spas, bought art prints, office furniture, large televisions, new technology, garden plants, tools, and ground art including fountains, and we have set about renovating and improving our homes.


We have done this mainly because we have $10bn spare, which we were going to spend on overseas travel but now cannot. Plus, we saved a lot of money during lockdown, the cost of borrowing money to finance purchases has fallen to record lows, and we had seven weeks of intensive examination of our homes to figure out what to change.


Because the inability to travel offshore for holidays is a major factor in our drive to spend more on the likes of landscaping, we need to anticipate that when the borders open, such spending will retreat back to normal levels. In fact, there is a good chance that such spending will be at below normal levels for a while come 2022-24, because having bought a durable good we do not need to buy another one for potentially many years.


Shelter from the storm


However, there is a large offset to this eventual spending weakness perhaps one to two years from now. Prospects for new house construction have turned on a dime and new properties invariably require some landscaping – even blocks of townhouses.

Back in March, my personal expectation had been that house building would fall by somewhere between 20% and 40%, most probably close to the 20% mark. But if house building now falls at all, it looks like the decline will be quite minor.


It is not just that the number of consents issued for new dwellings to be built around the country has only declined from a near half-century high of 37,882 in the year to February to 37,725 in the year to September. More forward-looking indicators of how busy builders will be have turned upward.


For instance, in the ANZ’s monthly business survey for October, a net 14% of builders said that they expect to be busier over the next 12 months. This was below the ten-year average reading of 28%, but well up from -64% in April, and this measure has risen every month since May. The trend is clear.


Migrants in demand


Clear also are the growing number of anecdotes from builders regarding difficulties sourcing labour. There is growing pressure upon the re-elected Labour Government to allow more working migrants into the country to allow house building and many other activities in the economy to proceed.


Why has the house building outlook changed so much? There is more than just record low mortgage rates involved, more than a record net migration gain immediately ahead of lockdown, and more than expectations of many Kiwis and other people entering the country when the borders one day fully reopen.

There is a dire shortage of properties for people to buy, and demand for property has risen at a pace we have never seen before, and certainly never seen before a recession has even ended. Buyers are unable to purchase a property which already exists, so they are flocking to builders to sign contracts for new-builds.

The surge in new housing demand is so great that in contrast to previous recessions, we are seeing no collapse in section prices and wholesale off-loading of financially stressed subdivisions. There has been a surge in demand for sections and developable land, to the point that even in Christchurch, the huge pipeline of sections created by the post-quake over-riding of the Resource Management Act could soon be used up.

History tells us that more subdivisions will be created around the country and that, with new housing demand so strong amid deepening concerns of housing affordability, the Government might just ease up construction migrant rules early. We can only hope.

The upshot is that prospects for the likes of concreting, timber production, and landscaping look better exiting this recession than has ever been the case for any previous recession. But could something come along and disturb this good outlook, such as strife following the US election, or new lockdowns in the UK and Europe to fight escalating Covid-19 infections?

There are risks to those parts of the country’s economy that rely on those markets. But 55% of New Zealand’s exports go to Asia, including 30% to China, which is now recording good growth. Good prices are being received for most NZ commodity exports, and projections for this season’s dairy payouts have recently been revised up by sectoral analysts.


With the outlook for NZ house prices, house construction, employment, consumer spending, infrastructure investment, and even commercial construction a lot better than seven months ago, the chances are good that our economy will continue to comfortably weather the challenges still besetting economies such as the UK and USA.




Tony Alexander has worked as an economist in New Zealand since 1987, initially with Westpac, then a share broking firm before almost 26 years with the BNZ as Chief Economist. He went out on his own late in 2019 and spends considerable time writing about the NZ economy with an emphasis on the housing market and explaining key economic developments in layman’s terms. He is a columnist for the Sunday Star-Times, publishes a free weekly newsletter at tonyalexander.nz and frequently delivers webinars as well as presentations in person.

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