By Gareth Vaughan
As the Australian Government lines up its Productivity Commission to probe banking competition, should New Zealand's do the same?
Australian Treasurer Scott Morrison recently said his government was ready to act on a Financial System Inquiry recommendation that bank competition be investigated. According to The Australian Financial Review, the Australian Productivity Commission is likely to be asked to consider whether the Australian Prudential Regulation Authority (APRA) gives sufficient consideration to competition issues. This comes with Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft recently describing the banking sector as an oligopoly.
The Australian oligopoly consists of the ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and the Westpac Banking Corporation. Here in New Zealand their subsidiaries - ANZ NZ, ASB, BNZ and Westpac NZ - dominate.
In a research note Deutsche Bank's Sydney-based banking analysts Andrew Triggs and Anthony Hoo point out a statistic commonly cited to demonstrate the oligopoly's dominant marketshare is the four's slice of the residential mortgage market. Using APRA's measure of the system it's 83%, and under the Reserve Bank of Australia's statistics including non-banks, it's 77%.
Based on Reserve Bank of New Zealand mortgage figures and the big four NZ banks' December general disclosure statements, the big four here have 90.2% of the home loan market.
How about a Productivity Commission probe of NZ bank competition?
Back in 2015 I suggested the Productivity Commission ought to probe banking competition in NZ. I cited big banks' dominance of KiwiSaver, high fees, high credit card interest rates and world leading profitability.
I also noted there is competition from the likes of Kiwibank, TSB, the Co-operative Bank, SBS, Heartland Bank, HSBC, Rabobank and other banks including three of China's big four, plus building societies, credit unions, finance company survivors and peer-to-peer lenders. Despite this competition, and the relative ease these days of switching banks, the big four have thus far been very good at holding marketshare.
My article was met with an underwhelming response from interest.co.nz readers. It attracted just one comment and was not among our better read stories. Does this mean bank customers are happy with their banks? That they take it as a given the big four's dominance should be probed? Or was it simply because I failed to include 'Auckland house prices' in my headline? I don't know.
But if the Australian review of banking competition gets underway in this NZ election year, it'll be interesting to see if there are any calls on this side of the ditch to follow suit.
Interestingly during Chinese Premier Li Keqiang's recent visit, Prime Minister Bill English welcomed the rise of Chinese bank lending in NZ from the local offshoots of the Chinese government controlled banks ICBC, China Construction Bank and Bank of China. English noted increasing competition for the dominant Australian-owned banks.
“We welcome some competition,” English said.
“We’ve got a very concentrated banking sector - probably more than most other developed countries - and it’s good that the conditions in New Zealand are such that smaller banks, including our local New Zealand-owned banks, are able to grow,” English said.
'A sole focus on marketshare would be misplaced'
Back to Deutsche Bank's Triggs and Hoo. They point out the type of mortgage marketshare enjoyed by Australia's banking oligopoly is not unique in an Australian context. (And nor, of course, is it in NZ where even greater market concentration is not uncommon such as in general insurance, supermarkets and building materials).
Say Triggs and Hoo; "Most industries in Australia tend to be highly concentrated. As such we would argue that policies expressly aimed at reducing major bank marketshare would be misguided and could potentially introduce greater risk into the financial system. Are there factors supporting structurally high banking sector concentration?"
Although acknowledging competition should always be encouraged, the Deutsche Bank analysts argue there are factors suggesting concentration will remain structurally high. These are;
i) A concentrated market makes prudential regulation easier;
ii) Big banks tend to have more extensive branch networks for customers; and
iii) Big banks with high return on equity and better risk management supports financial system stability.
"Arguably, greater digitisation in banking reduces the second argument, however we think concentration is likely to remain high. That’s not to say that the Government shouldn’t try to improve competition in the industry, e.g. by reducing barriers to switching between banks, however we argue a sole focus on the marketshare of the big four banks would be misplaced," Triggs and Hoo argue.
The chart below comes from Deutsche Bank.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
By Greg Ninness
Auckland housing is now the most unaffordable it has been for first home buyers since interest.co.nz began collating house price and household income data for its Home Loan Affordability Reports in January 2004.
The Home Loan Affordability Report for Auckland shows that a typical first home buying couple earning the median wage for their age group would now need to set aside more than half their after-tax income to meet the mortgage payments on a lower quartile-priced home.
The reports consider mortgage payments to be affordable when they take up no more than 40% of take home pay. The Auckland Affordability Report for March shows the mortgage payments on a lower quartile-priced home in Auckland would take up 50.12% of typical first home buyers’ after-tax income.
It is the first time that the mortgage payments on a lower quartile priced home have passed the 50% threshold since interest.co.nz began collating the data for its Home Loan Affordability reports in January 2004.
The reports provide a good measure of affordability because as well as tracking monthly movements in house prices, they also track the median after-tax wages of couples aged 25-29 in full time employment in locations throughout the country, via Statistics NZ’s Linked Employer Employee Data Series (LEEDS). They also estimate how much of their weekly income would be taken up by mortgage payments if they purchased a home at the REINZ’s lower quartile selling price for the same region.
|Separate Home Loan Affordability Reports are available for each of the following regions and cities (click to view).|
|Waikato/Bay of Plenty Regional|
|Hawke's Bay/Gisborne Regional|
|Central Otago/Lakes Regional|
|All of New Zealand
The reports also monitor movements in mortgage interest rates, and this allows them to estimate how changes in house prices, incomes and interest rates would affect housing affordability for typical first home buyers (click on the links in the box at left to read reports for individual districts).
In March the REINZ’s lower quartile selling price hit a new record high of $735,200 in Auckland, while the estimated combined median after-tax income for a couple where both were aged 25-29 and working full time in Auckland was $1605.90 a week.
The estimated mortgage repayments on a home purchased for $735,200 would be $804.86 a week, equivalent to 50.12% of a typical couple’s take home pay, and that is before other property related costs such as rates, insurance and maintenance, which may also be substantial.
More than one obstacle
However being able to afford the mortgage payments is just one obstacle first home buyers would need to negotiate to get into a home of their own.
They would also need to save a deposit.
The Home Loan Affordable Reports calculate how much typical first home buying couples would have accumulated to put towards a deposit if they saved 20% of their net income for four years and put the money into an interest earning bank deposit.
An Auckland couple earning the median wage for their age group would have saved $73,319 over four years, which unfortunately is just 9.98% of Auckland’s lower quartile selling price.
So not only would couples earning average wages struggle to afford the mortgage payments on a cheaper home in Auckland, they would also struggle to raise a sufficient deposit, and that in turn means they could struggle to find a bank willing to provide them with a mortgage, even if they believed they could afford the repayments.
This combination of factors is why so many younger people in Auckland appear to be giving up on the prospect of ever owning their own home and resigning themselves to the prospect of renting for the rest of their lives.
And it is not something people could have planned for.
From affordable to severely unaffordable in under three years
The reports show that housing in Auckland only moved into unaffordable territory for typical first home buyers in October 2014.
Prior to that mortgage payments on a lower quartile-priced home in the region were below the 40% of net income threshold that determines whether payments are affordable or not.
So buying a first home in Auckland has gone from being affordable to severely unaffordable in less than three years.
There’s a simple explanation.
Over the last three years Auckland’s lower quartile selling price has increased by $222,600, rising from $512,600 in March 2014 to $735,200 in March this year.
That’s an increase of 43.5%.
But over the same period, the median after tax income of Auckland couples aged 25-29 who both work full time has gone from $1502.09 a week to $1605.90 a week, up $103.81 a week or +6.9%.
Which means house prices have increased at a far greater rate than incomes.
That has been driven by two main factors: falling interest rates and strong migration-driven population growth, which means demand for homes has outstripped the supply of new homes by a considerable margin.
Over the last three years the average two year fixed mortgage rate offered by the major banks has fallen from 6.13% to 4.84%.
All other things being equal, mortgage payments should have come down, but they have gone up instead.
That’s because it is human nature that people tend to buy the best home they can afford, and for first home buyers that often means borrowing as much as they can.
So when interest rates come down, the amount they borrow goes up and that means they are prepared to pay more for their home, which pushes prices up.
The result is that buyers end up paying more for the property they want and take on more debt to do so.
That process has then been supercharged by the high levels of migration-driven population growth that has occurred over the last three years, with the growth in Auckland’s population exceeding the ability of the building industry to produce new homes.
Housing shortage growing
It is estimated that since 2010 Auckland’s housing shortage has grown to around 30,000 homes and is continuing to increase month by month as migration-fuelled population growth continues to hit new highs.
Of course this is not the first time housing has been unaffordable in Auckland.
According to the Home Loan Affordability Reports, mortgage repayments on lower quartile priced homes in Auckland were above the 40% of net income threshold for typical first home buyers between December 2006 and August 2008, peaking in that cycle at 45.67% in November 2007.
What was different back then was that mortgage interest rates were comparatively high, coming in at 8.13% in December 2006 and peaking at 9.64% in March 2008, before starting a steady decline.
Now the situation is reversed.
The average two year fixed mortgage rate hit its all-time low of 4.35% in May last year, and has since tracked up to 4.84% in March and is expected to keep rising.
That means the pain caused by Auckland’s housing crisis is unlikely to be restricted to the generation being locked out of home ownership.
There could also be tears in store for those who have borrowed heavily to buy Auckland property, either to live in themselves or as an investment to rent out, as they face a rising interest rate tide.
The problems that have been created in Auckland’s housing market are now long term and structural.
They are beyond the quick fix of policies that fiddle at the margins of the problem.
Content supplied by the Commerce Commission
With the end of the financial year upon us, consumers may find a tax agent at their door or on the phone.
“Consumers need to know that if the phone rings or there’s a knock at the door and they buy goods or services, they may have entered into an uninvited direct sale (UDS) and some important legal protections for consumers will apply,” said Antonia Horrocks, the Commerce Commission’s General Manager, Competition.
“We have just warned a tax agent for entering into a UDS and failing to provide the correct written information to consumers and we want to remind all tax agents of their obligations where they enter into a UDS,” said Ms Horrocks.
The Commission has warned My Tax Agent Limited T/A Savvy Tax Agent (Savvy Tax), for failing to meet the disclosure requirements relating to a UDS agreement.
“Savvy Tax did not always provide its customers with a written agreement at the time the agreement was entered into. It would provide an agreement if a customer asked for one, but that is not sufficient. All tax agents must ensure that they provide a copy of the written agreement at the time an agreement is made,” said Ms Horrocks.
Agents are also reminded that consumers must be told of their right to cancel before an agreement is entered into. This right to cancel must also be set out on the front page of the UDS agreement.
Neither the agreement nor a brochure Savvy Tax provided to consumers included information about the right to cancel. Savvy Tax has since changed its agreement so it is clearer to consumers.
The Commission is also contacting other tax agents to alert them to the Savvy Tax warning, and to discuss compliance with them.
The uninvited direct sale (UDS) provisions of the Fair Trading Act came into effect in June 2014.
They apply where the price of goods or services is more than $100 or can’t be ascertained at the time the agreement is entered into. That may be the case with tax refunds where the price will be a proportion of an as yet unknown amount.
A UDS agreement must describe the goods or services being supplied, set out both the supplier’s and the consumer’s contact details, and the total price payable under the agreement.
More information can be found in the Commission’s fact sheet.
If consumers think they might be due a tax refund, they can apply for one through Inland Revenue’s no obligation tax refund process.
A representative from the Inland Revenue advised that most beneficiaries, salary and wage earners who have received the same income for the duration of the year will have paid the right amount of tax and won't be eligible for a refund.
By Greg Ninness
Median rents have increased by $50 a week a week in parts of Auckland over the last 12 months, according to the latest housing bond data collected by Tenancy Services.
Across the entire country the median rent for new tenancies completed in March was $400 a week, up by $20, or 5.3%, a week compared to March 2016.
But rent increases were considerably higher in much of the upper North Island and Wellington and more modest in the rest of the country, with median rents in Christchurch continuing to decline.
The table below shows the median rents in the month of March for the last three years in main centres around the country, with sharp jumps recorded over the last 12 months in many places.
In Auckland, the biggest increases were in Rodney and Manukau, which were both up $50 a week in March compared to 12 months earlier, followed by Waitakere and Franklin, which were both up by $30 a week, North Shore +$15, and Central Auckland and Papakura +$10.
There were also substantial increases in Hamilton where the median rent was up $30 a week compared to a year earlier, and Tauranga +$43.
Wellington rents were also up substantially, with the median rent in March increasing by between $30 a week in Wellington City to $45 a week in Upper Hutt.
Substantial increases were also posted in Napier (+$40) and Queenstown-Lakes (+$30).
Christchurch went against the trend and median rents there have been slowly dropping for the last two years and in March were down $10 a week compared to a year earlier, and down $20 a week compared to two years earlier.
The interactive graph below plots the monthly changes in median rents for two bedroom flats and three bedroom houses in Auckland’s central suburbs (suburbs within the former Auckland City Council boundaries) and in Wellington City and Christchurch.
It shows that the median rents for three bedroom houses in Christchurch peaked at $450 a week in the period from February 2014 to June 2015 and have since declined $30, or 6.7%, to $420 a week.
In Wellington City the median rents for three bedrooms houses has risen steadily since May last year, peaking at $572 a week in February this year then dropping back by just $2 a week to $570 in March.
In Central Auckland the median rent for a three bedroom house has been steadily trending up for several years and peaked at $630 a week in February, before dropping back to $615 a week in March.
The sharp increase in rents in many parts of the country also corresponds with a jump in new letting activity.
Tenancy Services received 15,379 tenancy bonds from around the country in March this year, up 8.3% compared to March last year and up 11.3% compared to March 2015.
That reflects an increase in demand for rental properties as more people are priced out of home ownership by high housing prices and the growing demand for rental housing as a result of increasing levels of net inward migration.
On the supply side, the surge in investor activity that has been evident for the last several years has seen an increase in the supply of rental properties as investors have taken an increasing share of the market from owner-occupiers.
However that fact that rents are continuing to increase so sharply when the supply of rental properties is also increasing suggests that supply is still falling well short of demand.
By David Hargreaves
There might have been some sharp intaking of breath on this side of the Tasman (probably largely from housing investors) when news emerged last week of the crackdown in Australia on interest-only lending.
While we like to (particularly for sporting purposes) highlight the differences between our two countries, the reality is we are quite similar.
So, the obvious question would be whether something like the moves announced by the Australian Prudential Regulation Authority and then separately, but in very aligned fashion, this week by the Australian Securities and Investments Commission are either desirable or likely here.
Personally, I would see them as desirable. But likely? No. Not at this stage anyway. I think that's a pity because I see them on the one hand as a way for investors/speculators to keep pumping up the prices of houses, while for owner-occupiers they are potentially a dangerous trap, given that the owners become dependent on rising values to increase their equity. Risky.
I find interest-only loans a slightly curious thing in New Zealand. It seems to be something that not many people talk about, but clearly a lot do.
A browse of bank websites brings a variety of different responses to the subject of interest-only lending, but generally it's certainly not something heavily promoted. But again it's something the banks do a lot of.
The Reserve Bank's been taking much more of an interest in recent times in the subject and last year started regularly publishing figures on the amount of interest-only lending done collectively by the banks.
In introducing the new C32 lending tables in June last year, the RBNZ, indicated - if you read between the lines a bit - that it didn't view the current levels of interest-only lending as problematic.
Certainly, if you do some quick comparisons between this side of the Tasman and the other side, things quickly look quite chalk and cheese.
I confess, I was not aware that as much as 40% of Australian bank's existing mortgage loans are interest-only. That's a staggeringly high figure in my view.
When releasing the first set of interest-only stats here midway through last year, the RBNZ said the equivalent number here was about 28%. It also said that had been relatively consistent over time.
If the RBNZ's been concerned about interest-only lending, it might have had some concerns about the amount of such lending going to housing investors.
There's more than one way...
But proving that there really is more than one way to skin the proverbial cat, the RBNZ's moves announced last July to force investors to come up with 40% deposits seem to have curbed this.
Before the July announcement, on a monthly basis investors were often making up more than half of the amount borrowed on interest-only. As of February that proportion was just a little over 40%.
Likewise, the proportion of money advanced on interest-only terms every month has declined, from around 40% before the middle of last year to just 33% in February. And of course that latter figure is not much higher than the 30% APRA is now telling the banks they should limit themselves to.
But while our figures look a lot better than those across the ditch, I don't think there's room for complacency.
The RBNZ pointed out when introducing the new statistics that the proportion of interest-only on high LVR lending would be small. But it is worth noting the, from a small base, increase of the percentage of owner-occupiers on interest-only high LVR loans.
I don't see a lot of point in being on interest-only terms when living in your own home. There would just be the sense of not getting anywhere. The figures would suggest to me that some people are going interest-only because that's the only way they can afford the mortgage. And with interest rates this low currently. That's a scary prospect.
Okay, we don't have the stretched lending figures they have in Australia, but I would still like to see interest-only lending clamped down on.
Given that it is extensively used by investors/speculators, clamping down on it would clearly be another lever to control the housing market in the future - if it looks as though it will need it.
The other point is, it is just another way of derisking the banking sector.
Everybody seems reasonably comfortable with the situation in this country at the moment. And certainly we don't have some of the hair-raising figures that can be seen in Australia.
I still don't see though - given that the portion of interest only lending has now shrunk to about 33% on a monthly basis - why we couldn't apply that 30% rule too. Just as a prudent and pro-active measure.
By Gareth Vaughan
Financial Markets Authority (FMA) CEO Rob Everett says Kiwi retail investors who choose to punt on short-term derivatives products such as foreign exchange contracts for difference (CFDs) and binary options, should do so through companies licensed in New Zealand.
This is a key message from the FMA as it moves to licence firms selling short-duration derivative products, which are the source of more than 40% of the complaints received by the regulator. The Financial Markets Conduct (FMC) Act introduced licensing for derivatives issuers in December 2014. However, this oversight is not all encompassing. Thus the FMA has reviewed the definition of “derivative” and is now looking to include, in licensing requirements, companies offering CFDs and binary options products, but exclude contracts through which people convert currency for the likes of overseas holidays that settle within three working days.
Although warning CFDs and binary options are “very high risk,” even for experienced investors and to take “extreme caution” with them, Everett told interest.co.nz the FMA is not looking to ban them altogether.
An all or nothing type of trade, binary options see the punter select currencies, stocks, indices, or commodities and effectively place a bet on whether they think the value will go up or down. A CFD is essentially a contract between an investor and a spread-betting firm. At the end of the contract, the parties exchange the difference between the opening and closing prices of a specified financial instrument, possibly shares or commodities.
The FMA received 384 misconduct reports about derivatives or derivative issuers in 2016, equivalent to 42% of all misconduct reports last year.
“We have warned people a few times about this being high risk and complex, particularly when markets start to get choppy [and] the way FX [foreign exchange] works can really catch people out. But we think getting on top of the people who are offering the product is more proportionate than banning it altogether,” says Everett.
“We are trying to say to people there is now a licensed, regulated environment that although we can't guarantee you won't lose money, you really must be safer within that than outside.”
“And this is a classic case of seeing the business that gravitates to just outside [the law], and although being a little bit reluctant to keep moving the boundaries, on this one it did fit with our objective of saying to people; 'okay, if you're really going to get involved in this space you should do it with someone we know who they are, they're accountable to us, we licensed them, we can find them if we need them.’ So it is really saying to New Zealanders ‘if you are in this space don't take the calls from overseas, deal with someone here,” says Everett.
Hard to find them
Over the past 18 months, the FMA says the volume of complaints about online FX and other short duration trading services, such as binary options, has held at about 40% of total complaints it has received. This is against the backdrop of the emergence of online trading platforms, often based overseas, targeting New Zealand investors with offers of short-duration derivative products.
Everett says it’s often hard to know what country or jurisdiction(s) a firm offering short-term derivatives products is actually operating from.
“Some of the ones that we've tried to trace, it's actually incredibly difficult to peel back and find out who the actual operators of the business are and you get layers upon layers. You end up in Bulgaria, Romania, China and Russia. And that's what we're trying to say to people. Which is ’if you can't tell who you are dealing with, we can't help you when it goes wrong’,” Everett says.
At the same time as licensing short-term derivatives providers, the FMA wants to ensure ordinary spot FX contracts involving actual delivery of foreign currencies, for the likes of holidays overseas, are not unintentionally captured by this change.
"Until recently, our interpretation of the definition of 'derivative' in section 8 of the FMC Act was that any derivative transaction settled within three working days (foreign exchange agreements) or one working day (any other case) was not regulated. Therefore a derivative issuer licence was not required for that activity. Due to concerns about the potential harm these products pose for investors, we reviewed our position and decided that businesses selling these products should in fact be licensed. This decision is based on our view that the law requires businesses selling these products to have a licence," the FMA says.
A consultation paper is seeking feedback on whether the FMA should use its designation power to declare spot FX contracts physically settled by delivery of an amount of currency within three working days are not derivatives for the purposes of the FMC Act. The three day timeframe is regarded as the classic settlement cycle for buying foreign exchange.
Tip of the iceberg
Everett says the FMA has not tallied the money NZ investors claim to have lost to unlicensed, mostly overseas, short-term derivatives products.
“We're very conscious that the FMA is still relatively new. A lot of the people who seem to get involved in these sorts of products actually have no idea who to talk to if something goes wrong. [They] have probably never heard of the FMA. So in addition to consumer education stuff we have been doing, we are conscious that probably the complaints we are getting are the tip of the iceberg. So it does worry us once we see a steady proportion like this because it tells us there's probably a lot of stuff we're not seeing,” says Everett.
And interest.co.nz has reported on NZ financial services professionals discovering their IDs being used without permission by a dubious Israeli binary options firm. Additionally the FMA's announcement leaves no doubt that controversial Hurricanes sponsor Fullerton Markets, which offers foreign exchange and CFD products to NZ investors, requires a licence.
The FMA says from December this year, any company making regulated offers of short-duration derivative products to New Zealanders that settle within three days, whether they are based in New Zealand or overseas, will require a licence. The FMA expects all unlicensed providers to apply for a licence by August 1.
'You squeeze the balloon in one place and it bulges somewhere else'
Everett, meanwhile, doesn’t think it was a mistake not to licence companies offering short-term derivatives products from the beginning of the FMC Act regime, which launched in 2013.
“The way these sort of products work you squeeze the balloon in one place and it bulges somewhere else,” Everett says.
After a steady volume of complaints, seeing where the global regulatory tide is going and setting aside debate over whether it is regulating a trading rather than investment product, the FMA has decided to “move the goalposts slightly.”
“So we could have included this first up, but I think there were decent reasons for not doing so and we also didn't want to catch a bunch of what you would call very legitimate foreign exchange business, which we will still need to make sure we don't accidently catch. I see this more as us responding to a global environment that has a real impact here, says Everett.
NZ registered firms operating overseas not captured in the net
Everett acknowledges the FMA’s plans to licence short term derivatives products won’t capture established New Zealand registered firms “up to no good somewhere else [overseas].” (See more on such companies here).
“The licensing regime is designed to protect New Zealand investors and push New Zealand businesses into that regulated environment. So no it won't really address that issue of a company that's established here that's up to no good somewhere else.”
“If they're doing it here, offering it here to retail investors, they'll have to be licensed and as a result they'll have to be on the Financial Service Providers Register. But no, if there's no offering to retail investors [in NZ] this regime would not catch them. That's consistent with the rest of our licence framework,” says Everett.
By Bill Rosenberg*
Last month, Prime Minister Bill English announced that his Government now favoured raising the age of eligibility to receive New Zealand Superannuation from 65 to 67 by 2040, a turnaround from its previous denial that any change was necessary. Labour has also reversed its 2014 election policy and now opposes the raising of the age.
The usual reason given for raising the age of eligibility is affordability of the scheme. For example the Commission for Financial Capability (formerly the Retirement Commission) in its 2016 Review of Retirement Income Policies justified it by asserting that in 2015/16 New Zealand Superannuation (NZS) cost 4.1 percent of GDP, and that “Treasury predict that it will rise to 7.1% (net) of GDP in 43 years”.
I have a look at these numbers and find that they are misleading. The picture looks very different if we take into account the tax paid by the New Zealand Superannuation Fund, the contributions both main parties say they will start making to the Super Fund, and the contributions the Super Fund will start making to the cost of New Zealand Superannuation in 2032/33 (according to current plans).
There are further arguments to be considered about the affordability to the public purse of current levels of payment and economic affordability.
The affordability to the public purse is frequently presented as an absolute. But affordability is a matter of priorities, what New Zealand society wants and what it is prepared to pay in the way of taxes. Many other countries are facing the same problem and many have considerably more retired people, and costs, in proportion to their populations than we do.
Economic affordability centres around the ‘dependency ratio’ – the number of people who are working, thereby generating income to be taxed and shared with superannuitants, compared to the growing number of superannuitants. But this does not take into account either other ‘dependants’ such as children, nor Treasury’s most recent long-term projection which did not show a looming economic problem.
Finally, it will become apparent that the question of New Zealand Superannuation cannot be seen on its own: we need to think about matters like New Zealand’s population and other forms of retirement income. I don’t cover these in detail but they are important to gain a full picture.
How much will New Zealand Super actually cost into the future?
Treasury looked at this question as part of its regular statement on New Zealand’s Long-term Fiscal Position. It released its latest one in November. In it they project current policies into the future to look at the ‘fiscal’ consequences of continuing those policies indefinitely – that is, the effect on government spending and revenue needs.
It shows that it is important not to rely on the headline figures of what the government spends on New Zealand Super. In the year to June 2016, payments to New Zealand superannuitants cost 4.9 percent of GDP or $12.3 billion. The projection shows that by 2060, the period of Treasury’s long-term Statement, it would be costing 7.9 percent of GDP – an increase of over 60 percent, which sounds a little scary.
But New Zealand Super is taxed – so it is actually its net cost after the claw-back of superannuitants’ tax payments that is important. (A Government could easily reduce its apparent level of spending by simply making New Zealand Super tax-free at its current net levels!) Its net cost to the government in 2016 drops to 4.2 percent of GDP or $10.4 billion. In 2060 it would cost 6.7 percent of GDP.
In addition, the Super Fund, set up by the 2000s Labour-led Government to partly fund New Zealand Super in the future, also pays tax. It doesn’t make much of a difference right now (though the $0.5 billion in tax paid in 2016 and $4.6 billion since the Fund started is not to be sneezed at) but by 2060 the tax is projected to be $8.0 billion a year. That brings the net cost by 2060 down to 6.1 percent of GDP.
Then there is the direct effect of the Super Fund. Firstly, both main parties (and the Retirement Commissioner) want contributions to the fund to resume – some earlier than others. The current Government won’t restart contributions until the year to June 2021. From then until the year to June 2033, when withdrawals are started from the Fund, there is an additional cost of up to $3.0 billion (which incidentally isn’t counted in Core Crown expenses because it is regarded as capital spending). In 2021, the total cost to the government of New Zealand Super plus these contributions is projected to be 5.0 percent of GDP. It would have been the same in the year to June 2016 had contributions resumed that year. By 2060, when the Fund is projected to be contributing $4.0 billion to that year’s New Zealand Super costs, the net cost to the government of the day amounts to 5.9 percent of GDP.
So the true comparison of the fiscal cost now and the cost in 2060 is more like this: 5.0 percent of GDP soon, compared to 5.9 percent in 2060. That increase doesn’t look nearly as scary. If it is affordable now (as all seem to agree) then it is likely to be affordable in 2060. Here’s a table summarising the situation with the total impact on government finances in the bottom line:
Affordability to the public purse It is wrong to present affordability to the public purse as an absolute in the way that English and some others put it: he was raising the retirement age to “ensure the scheme remains affordable into the future” . Affordability is a matter of priorities, what New Zealand society wants and what taxes we are prepared to pay.
The Retirement Commissioner points out that there are other costs that rise as the population ages such as health care. But to draw the conclusion that superannuation should be cut to pay for these is not logical, unless we are moving to a society where each generation is expected to look after itself and not concern itself about younger or older generations.
We do always need to consider our priorities and options, but one option is to raise more revenue. Many New Zealanders would be willing to pay more to maintain the financial security of their parents and themselves in retirement, and for other public services that they value. If the assumption is that the current level of taxation is fixed and can never increase as a proportion of GDP then there are many other problems we cannot address and the outlook for New Zealand is dim. Some of these problems cannot be addressed by individuals on their own (such as environmental problems, income inequality and poverty). In other cases such as health and retirement income, individuals could pay for it but it becomes inefficient, inequitable and impoverishing (as the US private health system shows). It is much better for everyone if the risks are shared and it is paid from government revenue. It might raise the government’s costs, but from an economy-wide and societal point of view it costs less and is fairer.
We are not a highly taxed country. OECD data shows that we have one of the lowest differences between what an employer pays and take-home pay among the high income countries that make up the OECD – we rank between 28 and 34 out of 34 countries and well below the OECD average. Our tax revenue as a proportion of GDP is low for a small country . We rank 19 out of 35 OECD countries and less than most similar size OECD countries. Our problem is not the level of taxation but its distribution.
The proportion of GDP New Zealand spends on pensions is also low. The OECD put it at 4.8 percent of GDP in 2013 (a misleading figure but it is just a basis for comparison). The OECD average was 6.4 percent of GDP and only 10 out of 33 countries had a lower proportion, including Mexico with zero and others that also have private compulsory contribution schemes. There were 14 already above 7 percent of GDP. New Zealand’s ratio is low partly because we are fortunate to have a relatively young population.
Clearly affordability is a decision that societies make in terms of their priorities.
Much of the economic debate centres around the ‘dependency ratio’ – the number of people who are in paid work and thereby generating income and tax revenue, divided by the number of older people. This is projected to fall: fewer people will be working to generate the income required for each retired person. Treasury’s population projections show it falling from 7 working age people to every person 65 or over in 1972 to 4.3 in 2017 to 2.1 in 2060. (That’s taking the working age population to be aged 15 to 65. It’s unlikely that adjusting the lower limit of 15 up a little would make a big difference to the analysis. Statistics New Zealand defines it to be aged 15 years and over.) . Of course the effect of the fall in the ratio will depend on how many people of working age are working (the participation rate), and how many of the over 64s are working. The participation rate is currently rising more rapidly in this age group than any other.
But consider this: people over 64 are not the only ‘dependants’ in society (and an increasing proportion of them are not dependent either). Children make up the other main group of dependants. In 1972 children under 15 made up 31 percent – almost a third – of New Zealand’s population and the 65+ age group only 9 percent. The working age population made up 60 percent. The whole ‘dependency ratio’ was 1.5 working age people to every dependant. The population is aging in two ways: we have a greater proportion of over-64s and a falling proportion of children under 15. In 2017 the children made up only 19 percent of the population, people of working age made up 65 percent and the over-64s 15 percent. The ‘dependency ratio’ is 1.9. By 2060 the projection reduces children to 16 percent of the population, people of working age 57 percent and the over-64s to 27 percent. The ‘dependency ratio’ would be 1.4 – not much lower than the 1.5 it was in 1972. So in 2017 we are in a sweet spot – the highest dependency ratio since 1972 was in 2.0 in 2006 and we are not far from that. Perhaps this is the unusual time rather than 2060! The effect of this all depends on the cost of raising, educating and looking after the health of children compared to the costs of old age.
It is interesting that Treasury’s economic projections for the size of the economy do not show an economy struggling to pay for New Zealand Super – otherwise its cost as a proportion of GDP would be much higher. It is of course dependent on its assumptions which may be unrealistic. These include a high proportion of people continuing to work, and in particular among the 65+ age group. It also assumes that labour productivity grows at an annual rate of 1.5 percent and that real wages (the average hourly wage adjusted for rising prices) grow at the same rate. Productivity has been struggling well below that level for a decade. Wages since the early 1990s have failed to keep up with productivity.
However if the link between productivity and wages were achieved, Treasury observes that raising productivity is not the answer to paying for New Zealand Super: raising productivity raises wages, which raises the cost of Super because it is linked to wages, and we are no further forward without more progressive tax rates.
All of this means that this modelling cannot be the final word on the subject. But it is not immediately obvious that there is an economic reason to reduce the cost of New Zealand Super.
This discussion raises many questions: the question of New Zealand Superannuation cannot be seen on its own. What would be the impact on its affordability of increasing our future working age population by encouraging people to have more children or a somewhat higher level of immigration (better managed than now)? We could encourage more children by paying a universal child allowance, making child care better quality and free, and reducing working hours. Treasury says that if it raised its assumed net immigration rate from an average of 12,000 per year to 25,000 per year in the long run (both much lower than at present), “population ageing slows and the population is younger and approximately 928,000 higher in 2060. The higher net migration lowers the ratio of expenditure-to-GDP” and reduces net core Crown debt. These questions add to calls for a proper think about where we want for New Zealand’s future population to head – a population policy.
New Zealand Super is not the only income retired people rely on. We should be thinking about boosting Kiwisaver, and the Retirement Commissioner recommends raising contribution rates. The CTU has proposed making Kiwisaver compulsory if the employer contribution rate was raised to 6 percent, there was a 2 percent contribution from both workers and the government, the minimum wage was increased at the same time, and the government contribution of 2 percent (of minimum wage or benefit level or another amount) applied to all those of working age who are not earning for a period.
We should also be thinking of fair ways to pay for the increasing cost. Susan St John in the Auckland University Retirement Policy and Research Centre has made proposals for a progressive tax on those receiving New Zealand Super but more universal solutions may be less contentious given our history.
There will never be a last word on this subject. We should continue to review the situation, keeping a watch on both the adequacy of our people’s retirement income and the cost of it. But New Zealand is lucky enough that we don’t have to make urgent decisions to manage the cost of New Zealand Superannuation.
* Dr Bill Rosenberg is the Policy Director and Economist for the New Zealand Council of Trade Unions. This piece was first published in the CTU's March Economic Bulletin and is republished here with permission.
By The Taxpayers' Union*
The Government’s failure to index tax brackets to inflation since 2010 now costs the average Kiwi income earner almost $500 each year according to a new report released by the Taxpayers’ Union. The report, "5 Options for Tax Relief in 2017", models five options to deliver meaningful tax relief packages which could be part of Budget 2017 with fiscal implications of $3 billion or less.
Taxpayers’ Union Executive Director, Jordan Williams, says, “The National Government likes to talk the talk on lower taxes, but this report shows very clearly that they are simply not walking the walk. Because tax thresholds have not been adjusted with inflation, the average Kiwi worker is now paying $483 more per year in tax than in 2010.”
“By 2020, Government surpluses are expected to be $8.5 billion per year. With Bill English having pumped $10.36 billion into new spending, and only $415 million allocated for tax relief in that time, if now isn’t time for meaningful tax relief it never will be.”
“In addition to modelling various options for tax relief to compensate New Zealand families who are paying more, the report calls for tax thresholds indexed to inflation going forward. That would prevent Wellington increasing the average tax rate paid by New Zealanders every year, raising extra revenue for the Government, in real terms, without the transparency of actually raising taxes.”
“If we instead indexed thresholds to the growth in average earnings, dating back to 2010, the average earner would save $1,350 each year, or $26 each week."
“With the Government set to make a decision on Budget 2017 and its tax relief package in the coming weeks, we hope this report gives taxpayers assistance in understanding what is realistic for Budget 2017.”
The paper was prepared by the Taxpayers’ Union, with input from Research Fellow, Jim Rose, former IRD head of policy, Robin Oliver, and a former team leader of revenue forecasting at Inland Revenue, Dr Michael Dunn.
$3bn relief package - 5 options
5 Options for Tax Relief assumes the Government commits to a $3 billion tax relief package. When asked in 2016 how substantial a tax relief would be on the cards in 2017, John Key said "$3 billion I reckon".
There is a distinction between inflation-indexation and average-earnings indexation. Inflation-indexation involves adjusting the thresholds of each tax bracket to inflation. Average earnings indexation involves adjusting the thresholds to the growth rate of average earnings. For example, if average wage growth is 3% in 2017, the thresholds of every bracket will increase by 3%.
The options with a fiscal impact of $3 billion or less which are modeled in the paper include:
- a tax-free threshold up to $13,000. This would save all taxpayers earning more than $13,000, $1,295 each year;
- a reduction of the marginal tax rate of earnings between $48,001 and $70,000 to the lower rate of 17.5%, and an increase of the 10.5% threshold from $12,000 to $24,000. This would benefit all full-time income earners but especially targets middle-income earners. For example, a dual-income earning household with a combined income of $100,000 would save over $4,000 a year;
- reducing the tax burden of high income earners by eliminating the top tax bracket and reducing the $48,001+ rate to 26%. The model also reduces company and trust tax rates are reduced to 26% – reducing incentives to income shift and minimise administrative burden. This option would save a professional, earning a salary of $120,000, more than $4,300 each year;
- an increase to every threshold without adjusting any of the tax rates; and
- a reduction of the company tax rate to 13%. This would make New Zealand the second most tax competitive country in the OECD.
* The New Zealand Taxpayers’ Union is an independent and membership-driven activist group, dedicated to being the voice for Kiwi taxpayers in the corridors of power. You can see its website here.
ANZ economists believe interest rates will continue to nudge higher and this, coupled with tighter credit conditions, will keep the brakes on the housing market.
In ANZ's latest Property Focus publication the economists have estimated that mortgage costs on the average house for new purchasers in Auckland are chewing up about 51% of monthly income - and that's at a time of very low interest rates.
"That is on par with the highs reached in 2007 despite mortgage rates being near historic lows currently," chief economist Cameron Bagrie says.
"It highlights how sensitive some recent home-buyers in Auckland would be to even a small lift in interest rates."
And Bagrie says interest rates are going to keep nudging higher.
"It won’t be rapid, and it won’t be driven by the RBNZ, primarily."
A directional change in interest rates has three important implications, Bagrie says.
Firstly, increases in borrowing rates change the economics of the entire borrowing equation and can turn "affordability metrics" sharply, especially when the levels of debt are far larger.
"House prices have risen to such an extent that we estimate that for the average Auckland household to purchase the average house (at a 20% deposit, 25 year mortgage term and at the cheapest mortgage rate on offer), debt servicing costs (principle and interest) would now represent 51% of average disposable incomes.
"A 1 percentage point increase in mortgage rates would see this jump to nearly 56%, which is far higher than in 2007, when the minimum mortgage rate was closer to 9%!"
Secondly, Bagrie says higher interest rates get the market (buyers) thinking about where rates could be a couple of years down the track – "and that’s critical for market psychology".
And finally, higher rates force a shift to the fundamentals and more cash-flow based investing. "It needs to be more of a numbers game and less of a capital gain one. There are still strong expectations for capital gain though; 4.6% according to the ANZ Roy Morgan expected house price inflation measure."
Bagrie notes that the property market has cooled rapidly as the combination of loan-to-value ratio restrictions, higher interest rates (a turn in both the local and international cycles) and "credit rationing" dampen demand.
"That’s provided a near-term hit to recent exuberance, though it’s worth bearing in mind that a demand-supply mismatch will provide support and typically that’s seen the market run away again after previous similar lulls.
"What is different this time around is that interest rates are moving up and appear set to continue to do so, and policymakers are more serious in their desire to quell excessive lending growth. This will reduce the potential for the market to lift in a material fashion from here."
On the actions of policymakers, Bagrie says: "The RBNZ is undertaking a review of bank capital; if banks have to hold more capital that will put more upwards pressure on interest rates. Regulators on both sides of the Tasman are not standing idle; this will impact both the price and availability of credit as they eye curbing the credit accelerator model and leveraging behaviour (growing borrowing in excess of income growth), which are seen as a threat to financial stability."
Bagrie says that previously when the RBNZ has introduced loan-to-value ratio restrictions there has been a lull in housing market activity followed by a resurgence as interest rates have continued to fall.
"House prices can look semi-affordable at a house price to income ratio of 9.5 when interest rates are extremely low, but the key point is that it is not sustainable; the equation can change dramatically when interest rates nudge higher."
The key driver of the anticipated continuing rises in interest rates, Bagrie says will be the "the massive funding gap, which is forcing a change in bank’s behaviour".
"Deposit growth continues to trail credit growth. In household parlance, that’s more money going out the door than is coming in," Bagrie says.
"Banks can fill such a gap temporarily by borrowing offshore, but it would not be in New Zealand’s long-term interest to let such a gap persist. The current account deficit (and external debt levels) would blow out, New Zealand’s credit rating would likely get reviewed, and inflation would turn up if a spending boom were to join the housing equivalent, necessitating tighter monetary policy and a higher OCR. Credit-driven booms invariably end in a bust as the piper gets paid."
Bagrie says the banks' funding gap portends more pressure on deposit rates to lift and credit growth to slow, "which is precisely what we are seeing".
"...And on top of that we expect a gradual rising bias to international interest rates, which will impact longer-term rates here. Which is going to win out? Rising interest rates and diminished credit or a shortage of housing supply in the face of still-strong migration?
"The former will actually dampen the supply side response, making the supply-demand imbalance even starker. Witness all those stories in the paper about projects struggling to get finance – although a big reason for this is also an explosion in construction costs, which makes it even more difficult to get the deals to stack up (refer last month’s Property Focus). Economics 101 tells us prices will need to lift if an even larger shortage opens up.
"We’re backing interest rates and credit to dominate supply-demand imbalances, or at least buy some time for the latter to catch up. That seems to go against the aforementioned Economics 101 conclusion, but if the supply thesis was really all that’s driving property prices we wouldn’t have seen such a wedge open up between house prices and rents. The latter would have risen more sharply too. This doesn’t mean we discount supply tension. Such tension will still be apparent for a long time yet. We simply need to put it in context and think more broadly."
By Gareth Vaughan
Some years ago I wrote numerous articles featuring Australian company Toll Holdings. This was when Toll was acquiring New Zealand's struggling rail operator, then known as Tranz Rail.
At the time Toll was on an acquisition binge. In Australia Toll managing director Paul Little was sometimes referred to as a deal junkie. And he even married his investment banker.
If Little was a deal junkie then his counterpart at Chinese company HNA Group is the King Kong of deal junkies.
HNA is the company the Melbourne headquartered ANZ Group announced in January had agreed to pay NZ$660 million for New Zealand's biggest finance company, UDC Finance, which has total assets of about $2.7 billion.
ANZ has said it expects the deal, which needs Reserve Bank and Overseas Investment Office approval, to be completed in the second half of 2017. From HNA, in NZ, we've so far heard nothing.
From the perspective of UDC's 175 staff, its borrower-customers, depositors/investors, and the NZ financial services sector as a whole, just what will HNA bring to the local market?
On its website HNA Group describes itself as a conglomerate founded in 1993.
"It [HNA Group] has created a miracle in the business community over the past two decades, successfully transforming from a traditional aviation enterprise to a conglomerate, and expanding from Hainan Island to the globe," the website says.
That HNA has been on a global acquisition binge is an understatement.
Here's a selection of headlines derived from a Google news search of HNA Group on Friday afternoon;
China's HNA Is Buying a NYC Office Tower for US$2.21 Billion (Or more than US$1,220 per square foot).
Australian office towers anchor AEP deal with HNA Group
HNA Group To Invest In Asiana Parent
HNA Group pays HK$7.44 bn for fourth plot of land at Kai Tak
HNA's Hong Kong-listed unit reports net annual loss of HK$21.9m
China's HNA Group plans to hike Deutsche Bank stake
Going back further, a Bloomberg article from April last year noted;
Will any company that's not had a takeover bid from China's HNA Group over the past year please stand up?
The Bloomberg article concluded;
As we've seen with Anbang Insurance's recent shopping spree for offshore hotels and financial businesses, the usual financial constraints often don't apply when it comes to well-connected Chinese companies following Beijing's push to invest globally. So there's no reason to look a gift horse in the mouth if HNA turns up at your headquarters waving a checkbook. But it might be as well to ask for cash.
The 'ask for cash' quip stems from HNA's debt position, highlighted in the Bloomberg article by the chart below.
A sinking credit rating
Credit rating agency S&P Global Ratings has detailed that it could potentially downgrade UDC's long-term rating as low as B+ if the sale to HNA Group is completed. S&P currently has UDC at BBB, having already downgraded the finance company from the AA- rating it had, which was equalised with parent ANZ.
The red oval in the table below highlights the 10-notch extent of the possible S&P downgrade. Already UDC has gone from a strong investment grade rating to a low investment grade rating, with the potential to drop to a "junk" rating. This, of course, has implications for UDC's borrowing. Should the firm's debenture programme continue under HNA ownership, depositors should expect significantly higher interest rates to match the much riskier business they're lending money to. (You can see credit ratings explained here).
Looking at HNA's group profile, there's an entity called HNA Capital Holding Co. Ltd. It's described as "one of the six cores" of HNA Group. HNA Capital, apparently, provides "comprehensive financial solutions" via its investment banking services, plus "combinations and innovations among diversified financial instruments."
Furthermore, HNA Capital "aims to build itself a world-leading integrated operator in international investment banking and modern financial services industry, undertake the responsibilities of both regional and national economic development, and create a financial consumer market with vast potential."
According to the website HNA Capital's businesses/services include investment banks, leasing, trust, insurance, securities, banking, futures, funds, guarantees, factoring, and small loans.
In a recent interview with Forbes Adam Tan Xiangdong, CEO of the group and chairman of HNA Capital, had the following to say;
We are a 23-year-old company. We have confidence to invest outside of China, and I still think this is a right time to invest, because China has a $3 trillion reserve. Also, the government supports people to go abroad. For our strategy we have airlines and tourist groups. We started from that. Then we have a logistics group and a big financial services sector. We call airlines and tourists people's movement. For logistics, we talk about all the goods movement; for financial services, we talk about capital movements. So for anything related to these three parts of business, we are going to keep moving forward. We have 300,000 employees: 100,000 Chinese, 100,000 Europeans and 50,000 Americans; the other 50,000 are from the rest of the world. So we are an international conglomerate, which happens to have a Chinese origin.
And a recent Reuters article had this to say;
After a spending spree stretching from hotels to electronics distribution in 2016, Chinese conglomerate HNA Group says it is now investing in financial services, betting on asset managers and consumer finance for growth at home and overseas.
The owner of Hainan Airlines Co inked about $20bn in deals last year, snapping up a stake in Hilton Hotels and investing in catering and logistics firms – spending that raised concerns the group was borrowing too heavily and spreading itself too thinly. With more than $100bn in assets, investments this year have included a hedge fund platform, a New Zealand lender and a 3% stake in Deutsche Bank.
The moves reflect a broader push by China into financial services globally as Beijing encourages its corporate sector to expand overseas, although they face increased regulatory scrutiny in the United States and Europe.
Additionally the Reuters article noted some possible attractions for HNA in taking over UDC;
In HNA’s latest deals, it bought a large stake in hedge fund platform SkyBridge Capital from Anthony Scaramucci, a high profile supporter of US President Donald Trump and spent $460mn on New Zealand’s largest non-bank lender UDC Finance.
Two people with knowledge of the matter said HNA is bidding for UK-listed insurer Old Mutual’s $900mn controlling stake in its US asset management business. HNA declined to comment. Both SkyBridge and UDC Finance, which mainly provides car loans and equipment finance, offer stable revenue, while allowing HNA to increase yields by borrowing in the institutional market and lending in the retail market.
The Auckland-based company also boasts a management system that HNA could potentially utilise in China, where consumer finance is blossoming from a low base.
Still HNA’s rapid expansion has prompted concerns it is spreading itself too thinly. “The real risk for HNA is a loss of strategic focus,” said Brock Silvers, founder and managing director of Kaiyuan Capital, a Shanghai-based investment advisory firm. “Their plan to build a financial empire takes a lot of human capital, resources and time.” Carol Yuan, an analyst with Aberdeen Asset Management, said she was concerned with HNA’s debt, which can sit anywhere in the group financial structure and can be issued by any part of the group. “It’s hard to get comfortable around how they manage risks,” Yuan said.
A successful, conservative business
UDC is known for the financing and leasing of plant, vehicles and equipment, mainly to small and medium sized businesses across NZ. Give this, UDC is something of a barometer for the economy, posting a record net profit after tax of $58.5 million for the year to 30 September 2016, a 3% increase on the previous year.
It's also a non-bank deposit taker with $1.46 billion worth of secured deposits outstanding as of December 31, with $2.76 billion worth of assets pledged as collateral against these. As David Hargreaves reported last week, as part of the ANZ-HNA deal, there'll be a meeting for the 13,500 UDC debenture holders to vote on winding up the finance company's existing debenture plan. UDC also currently has a $1.8 billion loan facility with ANZ.
UDC has been around a long time. The company celebrated its 75th anniversary in 2013 noting it "financed the first Masport motor mower and the first commercial Hamilton jet boat," having started life as Financial Services Ltd in 1937.
This longevity, of course, means UDC survived the meltdown of the finance company sector. Then-CEO Chris Cowell told me in 2010 UDC had survived by sticking to its knitting. UDC had not financed any property development, but rather the company, fully owned by ANZ since 1980, had continued to finance plant, equipment and vehicles. Added to that was funding support from ANZ and governance, risk management and liquidity risk forecasting which mirrored its parent, Cowell said.
Now it's proposed that this successful, conservative business, working in the SME heartlands of NZ's economy and borrowing money off ma and pa, will be taken over by a debt-laden Chinese conglomerate behemoth. A key question here is just what will HNA bring to the NZ market as owner of UDC? And how will HNA add to, and improve, UDC?
When a business changes ownership it's always a nervous time for staff, customers and competitors. It's fair to say that with UDC facing such a drastic ownership change, there should be plenty of nervousness swirling around this one.
*This article was first published in our email for paying subscribers early on Monday morning. See here for more details and how to subscribe.