Post RSS Feed 
Podcast Feed
GDP grew 0.2% in September quarter, less than expected; NZ$ dips to 69 USc (Update 2)
December 23rd, 2009New Zealand GDP rose 0.2% in the September quarter from the June quarter, which was less than the 0.3-0.4% that most economists had expected. Growth in the June quarter was revised up to 0.2% from 0.1%, which suggests the New Zealand economy has emerged from the recession, but only just. (Update 2 includes My view below)
The New Zealand dollar immediately fell to 69.9 USc from 70.3 USc prior to the release of the data, which suggests the Reserve Bank may be slightly slower to hike the OCR next year than previously expected. This would make the New Zealand dollar less attractive relative to other currencies.
Here is more detail from Stats NZ below. We will update this article with more info and reaction through the morning.
Economic activity, as measured by gross domestic product (GDP), was up 0.2 percent in the September 2009 quarter, Statistics New Zealand said today. This follows a 0.2 percent increase in the June 2009 quarter. These small increases in economic activity follow five quarters of contraction in the New Zealand economy. In level terms, economic activity during the September 2009 quarter was 2.9 percent lower than in the December 2007 quarter when economic activity last peaked.
“The economy continued to grow slowly in the September 2009 quarter, and the picture across industries was mixed,” said National Accounts manager Rachael Milicich. “On the production side of the economy, mining and business services showed the largest increases.”
By industry, the largest movements were:
- Real estate and business services, up 2.2 percent, driven by business services
- Mining activity, up 11.1 percent, driven by an increase in both extraction (mainly offshore oil production), and exploration (as measured by metres drilled)
- Manufacturing activity, down 1.9 percent, and now back to the June 1999 quarter level
- Construction activity, down 4.4 percent, the sixth decrease in the last seven quarters.
The expenditure measure of GDP, which is released concurrently with the production measure and is conceptually the same, was also up 0.2 percent in the September 2009 quarter. The production measure of GDP shows the volume of goods and services produced during the period, while the expenditure measure of GDP shows how those goods and services were used.
The volume of spending by New Zealand households was up 0.8 percent in the September 2009 quarter. Spending on durable goods (big-ticket items such as furniture, appliances, and cars) was up 2.0 percent, and spending on services also increased. Household spending on non-durables (which includes alcohol and food) fell 0.8 percent.
Investment in fixed assets, measured by gross fixed capital formation, was down 1.8 percent in the September 2009 quarter. The largest contributors to the decline were plant, machinery, and equipment investment (down 8.0 percent), other construction, which includes roads and bridges (down 9.3 percent), and residential building (down 5.0 percent).
My view:
2009 was the year we learnt nothing and changed nothing. We still have an unbalanced economy where activity is dominated by the housing market, consumer spending driven by the housing market, and where business investment is weak. Investment in the high value-added exports, manufacturing and technology that will boost productivity and real wages is languishing. Yet many people think everything is fine and dandy.
We are making the same mistakes all over again. We are investing in housing because it has a massive tax break and we don’t trust other types of investment. Baby-boomer landlords are condemning their children and grandchildren to low wages, unaffordable housing and eventually migration because they can’t see past the end of their own noses and the equity built up in their brick and tile nest eggs.
The detail in these figures show just how unchanged we are and gives a hint of where we’re heading. Here’s the proof:
- Household consumption rose 0.8% in the September quarter from the June quarter while gross fixed capital formation fell 1.8%. (We consume more but invest less in the machines to produce more)
- Household consumption on durable goods such as cars, furniture and appliances (which are mostly imported) rose 2.0% in the quarter (We consume more imported goods and borrow more from overseas to pay for them because we produce less ourselves and own less of the assets here that do produce things)
- Investment in plant, machinery and equipment fell 8.0% in the September quarter (Right at the moment we should be investing in gear to improve productivity we sit on our arses buying more iPods and two bedroom rentals)
- Goods producing industries fell 2.8% in the quarter and are now down 14% since the December 2007 quarter when the recession began (yet we think the New Zealand economy is recovering strongly)
- Service industry output (where real wages are lower) rose 0.4% in the quarter, with activity biased towards finance, insurance and business services (which include real estate), where output rose 2.2% in the quarter. (Do we really all want to be real estate agents, mortgage brokers and insurance agents?)
- Manufacturing fell 1.9% and is now back to the levels last seen in June 1999 (We have great ideas, great raw materials and great marketing skills yet we lack the investment nous or capital to turn these ideas and raw materials into high value-added exports)
The Reserve Bank’s concerns that the recovery will be unbalanced are being borne out and the pressure remains on the government to change our tax system to help rebalance the economy.
If they don’t, all those baby-boomer landlords will be sitting around in 20 years wondering why they have to jump on a plane to visit their grandkids. Do we want to become a nation of landlords or a nation of entrepreneurs and business people creating real jobs with real(ly high) wages?
John Key will give us his answer in the 2010 budget in May when he has an opportunity to take up recommendations likely from the Tax Working Group to impose a land tax, to equalise income taxes and to remove various tax breaks for property investors. If he doesn’t, he will prove himself to be a weak politician unwilling to challenge his blue rinse base that has his head stuck in the sand with the rest of the generation that voted him in.
If he does, John Key may prove himself to be the visionary that turned around the New Zealand economy and convinced on his own supporters to think of their children instead of themselves.
Your view? I welcome your thoughts and insights in the comments below.
Tags: GDP, Gross Donestic Product, new zealand
You may also like to read:
Loading ...
December 23rd, 2009 at 12:16 pm
Got to wonder where that kiwi dollar is going, now that it has broke down through 0.70… Next few (real) trading days could be a tell…
December 23rd, 2009 at 12:22 pm
Very very well said Bernard. I completely agree. Lets see what 2010 holds. If John Key doesn’t take the bull by the cahones in 2010 we may only have to wait a couple of years for Mr Market to teach us some painful lessons when we face down a proper recession in the land of the long white subdivision.
December 23rd, 2009 at 12:27 pm
“If they don’t, all those baby-boomer landlords will be sitting around in 20 years wondering why they have to jump on a plane to visit their grandkids.”
That doent quite work out
1/in 20 yrs a good proportion of us will have reached our use by date
2/Those that are left many will not be allowed to fly because of dicky hearts and stuff
3/And those who do manage to get on a flight will be going to see great and great great grandchildren
PS you latest survey….had to have a giggle….
And our parrots (native kakariki ) dont “squawk” they chatter like little machine guns
Aussie parrots “squawk” lol
December 23rd, 2009 at 12:35 pm
“Key may prove himself to be the visionary”…or that he has his…”head stuck in the sand”…Place your bets folks…you know what I think.
December 23rd, 2009 at 12:36 pm
Steptoe (Steps)
Machine guns are even better than squawking.
Most people who are 60 years old now will still be alive in 20 years time. You’re right of course about the great grandkids. Those 50 year olds who had kids in their late 30s (who have kids in their late 30s) may well be talking to their grand kids by facebook (or whatever the social network is in 20 years time) But the point is the same. Do we really want that?
cheers
Bernard
December 23rd, 2009 at 12:58 pm
…But I thought the Great Recovery would be led by the mystical cycle track and a ‘no-moan-zone’?
December 23rd, 2009 at 1:03 pm
Glad we got something for the deficit spending.Don’t expect anything in the budget. The party prepared to steal the most off future generations gets the votes
December 23rd, 2009 at 1:34 pm
I agree totally Bernard! Facebook is such a time waster – they should get on the bloody phone and ring their poor lonely (but asset rich) Nana in NZ if they want to keep in touch!
So if everybody’s heading to Oz do you think Nana and Pops should be buying a couple of investment properties in Oz too? Hmmm cheers for the lead BH definitely worth thinking about….
December 23rd, 2009 at 1:42 pm
Bernard – “Your view” is much like “My view”. Before we start winning we need ‘winning behaviours’, but before we get those we need ‘winning thinking’, and we still seem to be struggling with that:
http://www.stuff.co.nz/sunday-star-times/business/3177816/NZX-boss-can-t-wait-for-2010
“You would eliminate depreciation loading on plant and machinery. We’ve taken off R&D subsidies so it seems a bit odd to have subsidies for plant and machinery.”
December 23rd, 2009 at 1:43 pm
Same comments here in Oz, Paul:
“Mortgage repayments are roughly double their ratio of income since the golden days at (the) family beach house, and make up the vast majority of onerous debt. ….. what younger Australians need ….is not a nanny state but a free housing market that is half the price. The current protected version largely benefits a landed baby-boomer class that likes to preaching moderation from the pulpit of a BMW headed up the coast. “
December 23rd, 2009 at 1:48 pm
“Investment in fixed assets, measured by gross fixed capital formation, was down 1.8 percent in the September 2009 quarter. The largest contributors to the decline were plant, machinery, and equipment investment (down 8.0 percent), other construction, which includes roads and bridges (down 9.3 percent), and residential building (down 5.0 percent)”
Investment in residential building down 5%-what actually does this figure represent?
December 23rd, 2009 at 2:03 pm
John’s on to it…a budget of spin and pork slicing in prep for Nov 2011 before the peasants get to see Bill and John naked when the economic tide goes out on Noddyland.
December 23rd, 2009 at 2:34 pm
GDP still below Dec 08, this last two quarters of very small growth still does not undo even 1 negative quarter (and we’ve had 5). Although we seem to be getting used to bad news, the businesses out there are mostly doing it very hard. Banks and other financial institutions will be booking significant losses from this recession for the next 2 years.
December 23rd, 2009 at 2:58 pm
Interesting inerpretation. Year on year household consumption is still down 1.8%, household balance sheets are improving due to lower debt and higher savings. Real estate has increased primarily because it was hit so hard so its been a slow recovery from a 30% drop in activity.
Capital formation at the end of a long albeit shallow recession being low is nothing unusual at this stage of the cycle.
December 23rd, 2009 at 3:02 pm
Bernard, I guess you couldn’t resist one last beat up on property investors for 2009.
Personally, I wouldn’t put much weight on a 2% increase in durable goods spending, when it’s coming of such a low base – for example the value of private motor vehicle imports in the June 2009 quarter was down 50% from its peak level in Q4 2007.
About that air flight thing, sorry to drown out the violins, but exactly where are the grand parents flying to? Maybe it’ll be Aucklanders flying to Christchurch? Because when the median house price in Darwin is A$530,000 and even Hobart A$319,000 it sure makes a $150,000 starter home or a good standalone house for $250,000 in the mainland look like a good deal.
If you want to improve affordability fix the supply – don’t meddle with things that’ll constrain it.
I guess since it’s time to reflect on the year: I distinctly recall, when prices were down 10% or so in January, someone predicting there’d be another 15 or 20% to go. Just exactly what direction was that, Bernard?
Maybe you had your jersey on inside out again? Or I could be getting confused with when you were out at the Crafar’s place?
Curious poll. I’m not sure if anyone who’s voted for me has actually read my comments, it’s possibly more of an indication as to how many people would like to see things stuck up Bernard’s nose? I don’t know?
December 23rd, 2009 at 3:13 pm
What exactly were we suspose to learn, from what I can see.
1. Residential Housing is a most resistant place to put your money then finance companies and shares. We saw lots of FC’s crash and we saw the sharemarket plunge 40% (although has recovered). Housing wen’t down 6%
2. Aussie banks are a lot more secure then ones overseas, I didn’t see an Aussie bank crash. Also their lending criteria seems a lot stronger
3. Nothing is “Too big to fail’
4. Commentators predictions on the drop of house prices proved to be well off the money, also there predicition on the currency rate seemed poor
If anything recent events may have made residential property a more popular alternative (i.e I’m not trusting finance comapnies and I’m not trusting the sharemarket)
Of course a future house crash may make people change their mind, but at the moment I’m struggling to see what news worthy effect happened to make us change our minds. All I hear is conjecture
December 23rd, 2009 at 3:25 pm
Chris_J guilty as charged! Have been a way from the site for while (trying to be more productive) and admittedly, when asked, went straight for the guy who gets up Bernard’s nose with no idea who you were – a bit like the last election
December 23rd, 2009 at 3:39 pm
The market was down that 10% back in early 09 and in some areas it was down a good deal more. Look to what the RBNZ and the govt set out to achieve over this last year. The cheap credit which flowed into property and govt spending of borrowed loot way above revenue which kept falling. The regions remained in the property slump while some of the major cities had a bounce back in prices but the building sector has gone down…and down. Now we face 2010 with zero growth the most likely outcome but with rising total borrowing by govt and with revenue still falling. The start of the tax grab era will be signalled by English. Not the wished for change away from property speculation as the cornerstone to the economy but just good old higher taxes, charges and fees. Expect power and gas to be more expensive. Along with insurance and council rates. Those encouraged to rush to floating rates are in for a shock. Put that lot together and you get a big drop in spending…hence the revenue fall. In that environment, to expect the property bubble to remain intact through 2010 is wishful thinking. Good luck to those who borrowed to buy price inflated property. You will need it. Do not be surprised to read about the departure of many to Australia where the jobs may be more plentiful. Remember, by 2011 the 180 billion of private household debt will still exist but it’s friend public debt will be putting on weight a billion dollars a month…….
December 23rd, 2009 at 3:52 pm
Chris_J Says:
“Bernard, I guess you couldn’t resist one last beat up on property investors for 2009.”
Ignore him…we are just doing what our grand parents did in the early to mid 60s
buy or build a couple rentals, pay off before retiring, bit of extra income…
Grand dad dies leaving Grand ma comfortable…
Then she dies the estate is sold off and distributed amonst the Grown children with families, who dont really need the money anyway…
They do the same…and it goes on
Even the beating up on Baby boomers is generations old lol
You really expect the younger generation to blame anything but themselves?
The beauty is they will eventually be blamed for all the worlds whoas to…
Then we will look down at Bernard and say “ah ha told you so” lol
December 23rd, 2009 at 3:56 pm
I agree wholeheartedly with Arctor. So many of my friends lost huge amounts of money in failed finance companies. To me stocks and shares are just too risky –my money goes into housing.
December 23rd, 2009 at 4:08 pm
Bernard, say it again and keep on saying it – if nothing changes nothing changes.
We are close to the point when change will be imposed by those same strangers on who’s kindness we currently depend.
The next budget, and the lead up to it, is the chance for John, Bill and Gerry to show real leadership.
If they don’t, they will stand exposed for what they are.
Tax, capital markets the thinking is pretty well done, next comes the political will to push through those changes and reform monetary policy. Without different exchange rate performance and the other changes no one will invest in tradeable activity.
What needs to be done is crystalising. We will see.
December 23rd, 2009 at 4:09 pm
I give credit to Bernard for putting a prediction out there – at least giving reasons why it ’should’ have dropped. Good on you Bernard for at least putting your head out there. I believe in a 30% drop.. it just hasn’t happened yet because we’re too dumb and don’t listen to good advice.
December 23rd, 2009 at 4:21 pm
Bernard needs that credit you have just given him Bevan. Just like the dot-coms, his business related assets live in the mystical cyberspace universe – try securing a small business loan in NZ against that! Hah! Overnight… poof, along with Wally! “Now thats a NZ business we should be encouraging”
December 23rd, 2009 at 4:43 pm
Just remember fixing leaky homes and building prisons both increase GDP.
We need to focus on Productivity – both of capital and labour, export returns, offshore debt servicing costs, GNP/Capita and NDP.
While we remain fixated on GDP we are going nowhere.
There is nothing in these numbers to alter the long term view is that we are simply going bust.
As Mark Twain said – first you go bankrupt slowly, then it comes with a rush.
Borrowed money on borrowed time !
The only question is when we join the happy ship with Iceland, Hungary, Ireland and now Greece.
December 23rd, 2009 at 4:57 pm
Lets’ hope we don’t end up with an enquiry here asking questions like the Irish one, JB.
“Why did the risk system of our banks fail? Did we have sufficient or poor regulation? Why was asset inflation ignored? The findings could help us prevent future catastrophes….”
http://www.irishtimes.com/newspaper/ireland/2009/1221/1224261043398.html
December 23rd, 2009 at 5:52 pm
Are we going to follow Ireland?
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/21/AR2009122103522.html?wpisrc=newsletter
December 23rd, 2009 at 5:59 pm
IRD cracking down on property speculators
http://www.landlords.co.nz/read-article.php?article_id=3626
December 23rd, 2009 at 6:33 pm
An interesting read 28yo. The message will have an impact but what was the IRD doing in this area before 07?
Jeez thanks Luke…I’ll try not to splatter when I go pooof
December 23rd, 2009 at 6:42 pm
Wally, how about 2010, the year Wally coughs up for broadband? try http://www.wirelessnation.co.nz
have you watched Mario Stefano he’s an amazing guy
http://www.youtube.com/watch?v=EtXowOvD4Qs&feature=related
Ive been Christmas shopping,boy the trouble with having six women in your family.
December 23rd, 2009 at 7:40 pm
My view is National is made up of second rate business ppl (and not manufacturers either) who cant see past their noses….so nothing will really change…too much vested interest from those with “power” and too much vested interest from those with influence ie the contacts/lobby links to “power” inside the party wont allow their income to be threatened.
@Bernard: In terms of facebook many NZers (I konw) grew up in the sticks and their parents are still there….so those GPs get to see their grandchildren once or twice a year….facebook works now….I think as a parent I want the best my children if the experience they want/need is overseas then overseas they will and should go.
regards
December 23rd, 2009 at 7:44 pm
Similar to NZ the over-heated market was ignored,
http://krugman.blogs.nytimes.com/2009/12/22/a-strange-complacency/
“Where do you think it will be the worst?” Bernanke asked, according to people who attended the meeting, one in a series of sessions the Fed holds with economists.
I would have to say California,” said the economist, Richard Dekaser.
They have been saying that about California since I bought my first house in 1979, Bernanke replied.
This time the warnings were correct … ”
regards
December 23rd, 2009 at 7:46 pm
AndrewJ….my clunker has a trained rat for ram…no U tube and the HD is chocka because it’s so small. I have a notebook…1989 Apple with a 20mb HD…!
Enjoy the women…hope you have them well trained.
December 23rd, 2009 at 8:05 pm
I don’t think the median house price stats tell the real story on house price declines since peak – as they reflect sales only and on very small volumes. Ask those who paid 2004 to 2007 peak prices how difficult they would find it getting that money in today’s market. Plenty are trying it on in terms of asking price at the moment – but buyers aren’t in the main, playing ball. Also, many of the new builds during that period are struggling as the spec homes of today are benefitting from the higher NZD and hence many 2-3 year old houses have suffered greater than normal depreciation in my experience.
A lot of immigrants paid over the top in those heady days due to their favourable exchange rate in converting to NZD. Such is no longer the case, and hence sales volumes remain sluggish. They will slow further with interest rate rises, I suspect.
December 23rd, 2009 at 8:05 pm
UK getting hammered some more…
http://www.telegraph.co.uk/finance/economics/6867797/Fitch-warns-that-Britain-and-France-risk-losing-their-AAA-rating.html
So what happens if we do indeed head into a double dip recession? I cant see how credit downgrades are avoided….ie more support will have to be given….I cant fathom where all the money comes from to support this…
regards
December 23rd, 2009 at 8:33 pm
Kate Says:
“I don’t think the median house price stats tell the real story on house price declines since peak – as they reflect sales only and on very small volumes. Ask those who paid 2004 to 2007 peak prices how difficult they would find it getting that money in today’s market.”
Finally some other than me sees this!!!
And may I ask Kate, from your conservations with “those who paid 2004 to 2007 peak prices” what would they get and what sort of % drop would that be?
December 23rd, 2009 at 8:46 pm
OK, confession time. Tonight I bought a house………true, I did!!! I’d completely given up finding a suitable place at a price that wasn’t too ludicrous. Then one of my local RE agents phoned me yesterday and said she’d just listed a house that was perfect for me in every way and offered to come and pick me up and take me to see it (my car was in getting serviced). I kne the minute I walked in the door that it was “the house”. 24 hours later the vendors agreed to my top dollar and now IT’S MINE!!! Yes, I’m crapping myself about the future, all the debt…….but I paid less than the CV and the repayments are “only” $160 more than what I’m paying in rent (yes, plus rates and insurance) but it’s only 5 years old so no maintenance (or very little). My builder mate checked it out today and gave it the big thumbs up. Most of all, I love the house and it ticks every single box in terms of my criteria. I never expected that to happen, I’d totally given up. So, there you have it. Merry Xmas to me
December 23rd, 2009 at 8:50 pm
I don’t know either Steven – according to Ben Dyson (re UK)…
“The majority of government debt is actually sold to pension funds or asset management funds, rather than banks. In normal times, around 40% goes to pension funds, 30% to foreign entities, and only around 3% of government debt is held by banks. Naturally this may be changing quite quickly at the moment due to changes in the financial sector”
I would hazard a guess that it is changing very quickly, much is being ‘printed’ and perhaps trans-national banks are making up the difference. (by created credit?… as you say, where can it all be coming from…?)
Steps – good question, the other aspect is that the thin market is very selectively cherry-picked – so not a comparable or representative sample.
Cheers
December 23rd, 2009 at 8:56 pm
Congrats. Veedub! Home is where the heart is; all good things take time etc. Those of us still on ‘the outside’ hope you still give us your comments from time to time.
December 23rd, 2009 at 9:16 pm
Don’t quite know what you were expecting bernard…
the NZ economy slipped into recession well ahead of the rest of the world, so given that most countries NZ exports to are still in recession we could hardly have an export led recovery could we?
I also don’t know why you adopt such a hectoring tone. Its a recession, what are we supposed to have learnt? Changing the structure of an economy takes years rather than months and likely outlasts the term of a Government.
If you study the release from Stats NZ it hardly comes across as a rapid increase in economic growth… more like waking up from a hangover… its the morning after the night before and the economy still has a sore head…
December 23rd, 2009 at 9:25 pm
veedub : Congratulations ! Our house makes no economic sense at all . Old . Drafty . But it ” ticks all the boxes ” for us , too . And that is all that matters . Enjoy yours !!!
December 23rd, 2009 at 9:32 pm
Hey, over here
http://www.interest.co.nz/ratesblog/index.php/2009/12/18/top-10-at-10-gareth-morgan-targets-rbnz-for-reform-diversify-into-women-and-sheep-dilbert/comment-page-3/#comment-53674
December 23rd, 2009 at 9:45 pm
vw—another milestone in life–well done
December 23rd, 2009 at 10:06 pm
Chris J
I’d like to know precisely where, in Christchurch, you can get a good standalone home for $250,000. Cos I’ve been keeping an eye on that market for a while and doing my income sums, and, quite honestly, I’ve never seen anything I’d even consider at a push down there for less than $350,000. And considering I grew up in Bexley, that suggests to me you definition of “good” is, umm, flexible.
December 23rd, 2009 at 10:20 pm
And just one more comment. “Baby Boomer” actually covers a wide spread of ages. Depending on your definition, it could extend from 1946-1966. Most accepted defintions go from 1946-1964. As a tail-end Baby Boomer, I actually harbour a minor resentment at being flung in with the front-end folks, as my experience of life is actually more in line with Gen X than with my older co-BBs. And I have never willingly owned a rental property in my life. Though I do have to say the one I unwillingly owned for a few years – because when I left Nelson it was in a slump and there was no point selling the small unit I had bought to live in – made me more money than anything else I’ve ever owned in my life. Which is just as well, as it compensated for my first-hand experience of negative equity in early 90s London, and a disatrous foray into running a retail business in mid-noughties Auckland.
December 23rd, 2009 at 10:22 pm
Merry Xmas to all
Just to get a little off topic…
How do the non home owners feel about Rodders proposal that property owners have more voting power in Aucks super city than non property owners since they pay the bills?(May have got this wrong)
Would you expect representation without taxation?
p.s Bernard saw you on T.V you look very slim!! Well done!!
December 23rd, 2009 at 11:45 pm
Beautifully put Bernard. Agree with all you said. Aust has a CGT that makes Aussies think twice before speculating in property and look at their productivity & international debt compared to ours.
December 24th, 2009 at 12:06 am
hey veedub – that’s great – and less than CV (which means less than market rate when the market was running high) is what new entrant buyers should be insisting on.
Steps – I do alot of research using the rpnz database (the ones the REAs use) which gives all the data from the land transfer office. It lists every property – the last sale and the value of that sale – as well as current CV data. In many cases 2005 to 2007 purchases are 10-30% above current CVs. Alot depends on the timing of the most recent council revaluations. Those being revalued more recently (2009) are in many cases unchanged or lower than the previous CVs. I expect this trend to continue – in other words, over the next 3 or so years there will be little to no capital growth; and in the particularly ‘hot’ areas where peak prices are not being realised, CVs have or will come down.
Buyers like veedub (who buy under CV) contribute to this decline. Even if there are very few sales in a period – those sales are the data on which the entire district revaluation is determined on.
Note the number of real estate ads these days which just provide a CV – and no price indication. Basically REAs know buyers no longer have an appetite for purchases above CV and the “private valuations” which many sellers commission are no longer respected.
I just wish this information was cheap and accessable to the general public – and especially first home buyers. In particular, first home buyers considering ex-rental properties should find out what the current owner paid for the property (you can purchase the report from terralink for $2.50). In many cases if the current owner purchased before 2006, you can pick them up at well below current CV and the owner will still be making a handsome capital gain! Buyers should drive a hard bargain is all I can say – and be prepared to walk away. There is always another “perfect” (and often an even “more perfect”) property around the corner.
December 24th, 2009 at 12:39 am
Arguing over how we might alleviate the symptoms of an economic system of things in its throes… it’s becoming now like noise.
A few of my observations:
1) Never before has a generation output so many labour man-hours. This is impacting terribly on the family unit, with our children suffering the most.
2) Despite the above, many of us struggle to pay for the essentials: housing, food, electricity, etc.
3) The inexplicable exodus of the work force away from producing the essentials of life, into professions effectively parasitic in nature: money traders, mortgage brokers, insurance brokers, professional sportsmen, and the like. We certainly don’t lack creativity when it comes to inventing career types!
4) The tide of globalisation and competition evangelists, driving commerce into a game of winners and losers.
5) The rise of economic e-zealots, whose proposed solutions ensure corporate and individual greed continues to elude inspection. Instead, they direct us to be more productive… not too dissimilar to the Nazi directive “work makes you free”.
6) The inertia of this economic system of things now so great, that any attempt to rectify the situation is doomed to failure due to the ‘Copenhagen Effect’.
7) A curious and rather sudden erosion of human values that have stood unchallenged for centuries; for example moral. But this is best reserved for another forum and another time.
Some food for thought.
Christopher.
December 24th, 2009 at 1:17 am
Chris
10/10 for passion
Nazi reference probably a bit out of proportion tho. I mean we r not comitting genocide are we…
December 24th, 2009 at 7:04 am
Merry Xmas Bernard and all you bloggers out there. Bernard you are oft accused of being a doomsayer but I find it hard to disagree with what you have written here. I work in manufacturing for export (and am glad not to be the boss!) and things don’t look rosy, hard to see where the export-led recovery is going to come from.
The Key government wasted 2009 as a glorious opportunity to show some geniune leadership that NZ so desperately needs, they could have said hey we’re in deep shit this is what needs to happen if Godzone is to climb out of it. They have had years in opposition to figure out what needs to change so it seems the lacking ingredients are honesty and political courage. On a purely selfish level I am quite glad to be 53 not 23 so I’m not going to be around when things finally go totally pear-shaped. The kids though will not be so fortunate – what do our age group say to them?
Finally, let’s not get too hung up on GDP figures. The quality of economic activity is far more important than its quantity, e.g. is one well designed and constructed home worth more than three leaky ones? Not if you look blindly at gross GDP figures.
Peace to you all
December 24th, 2009 at 7:39 am
Congrats VeeDub…well below CV, your instincts feel good after months of looking, checked out structually….those are the basics
Kate Says:
“I don’t think the median house price stats tell the real story on house price declines since peak – as they reflect sales only and on very small volumes. Ask those who paid 2004 to 2007 peak prices how difficult they would find it getting that money in today’s market.”
” I do alot of research using the rpnz database (the ones the REAs use) which gives all the data from the land transfer office. It lists every property – the last sale and the value of that sale – as well as current CV data. ”
If you have kept the old db you will also have the previous sales of many of the houses. If you follow those thru you will see a drop of around 18 to 25% since Nov 2007, and quite a few of those that have been sold and resold since Nov 2007, have been sold at nice little profits, still well below peak 2007 levels and CV.
Also noticeable is the number of houses sold upto nov 2007, and resold in the boom period they are often sold to a relatives or another trust, company that the principals of these are tied up together, artificially inflating the price, most properly for tax right offs.
Then when one compares those individual houses sold pre Nov 2007 and are on the market now, have been listed for a long time because the asking price vis too high for the market, and those that are realistically priced are below the previous sales prices
Digging into the background of individual sales data turns up interesting little quirks that makes a mockery of the overall mean price summaries.
So BHs original 30% ratification figure prediction, warnings by the RB and Cullen in 2006/2007 have been and still are correct….with ppl like VeeDub taking advantage of it.
What would be interesting is to calculate into mean and individual prices the moneys being and going to be recovered by the IRD by investors who have bent the rules from 2003.
Ashley Says:
” Most accepted defintions go from 1946-1964. As a tail-end Baby Boomer, I actually harbour a minor resentment at being flung in with the front-end folks, as my experience of life is actually more in line with Gen X than with my older co-BBs.”
I agree, and believe most baby boomers would also resent including you in our elite group……real Baby boomers parents lived thru and old enough to remeber WW2 and the rationing, and their grand parent had young families during the depression…which tends to create very different mentalities to the tail ender boomers after the recession of 1958…..A better definition of a baby boomers is if you cant remeber the JFK assasination or where you were, you are not a baby boomer.
December 24th, 2009 at 8:31 am
@Ashley
I have never willingly owned a rental property in my life
I have – but I didn’t inhale! Congratulations Bernard you have succeeded – it is now considered ’shameful’ to own a rental property!
@Kate
Buyers like veedub (who buy under CV) contribute to this decline. Even if there are very few sales in a period – those sales are the data on which the entire district revaluation is determined on.
Thanks Kate. Being a property investor I always buy on the downturn and always aim to buy under CV as do most ‘property bulls’ so cheers for giving us some credit for contributing to (if not iniatiating) house price declines.
As for those emotive buyers that will pay any price to get ‘that house’ well they should just be ashamed of themselves for what they have done to future generations!!!
December 24th, 2009 at 8:53 am
Steptoe – by your definition, I am actually a baby boomer, as Dad was born in 29. Even those of us born in the early 60s were absolutely born into an environment of thrift. But that environment changed over our formative years, rather than in our teens, and I suspect that’s one of the reasons for the quite significant change in attitudes between early and late BBs.
Paul – I don’t consider it shameful to own a rental property. It’s just something I’ve never wanted to do, and my reluctant experience of being a landlord reinforced that. Some people enjoy owning rental properties and dealing with tenants. I happen not to be one of them!
December 24th, 2009 at 9:08 am
I think Bernard has completely missed the boat regarding property and tax. Haven’t NZer’s have always been able to hold property in their own name and write losses off against their incomes? Tax rates have been far higher in the past, so if anything, the incentive to buy property “for tax write-offs” has actually reduced over time.
- The cause of this global property boom was easy credit.
- The boom still happened in other countries who have far more property taxes than we do, such as Australia and the UK. Clearly, taxes didn’t work to prevent a bubble.
Obviously, the way to prevent property bubbles is to limit debt.
I do agree that not much has changed. Surviving finance companies are still pushing short-term, high-interest debt onto consumers who prefer to buy doo-dads rather than invest!
December 24th, 2009 at 9:19 am
Veedub – enjoy the house.
December 24th, 2009 at 9:27 am
Dave Smyth Says:
“Obviously, the way to prevent property bubbles is to limit debt. ”
Bubbles will always happen in all markets, the problem lays with Booms
And the basic cause of the Boom in property here was the removing of many banking regulations and RB tools back in early 1990s..like min deposits, bank deposit to lending ratios…. a move to full unregulated market economy, removing legislated restrictions that where based on forcing good business practises
December 24th, 2009 at 11:51 am
@Sam Smith: “through 0.70″ traditional practice is to run for safe havens, the USD…yet its the US that’s significantly causing this, stikes me as jumping back on the titanic….so I take it as yet another indicator of the second dip….so yes I agree lets watch for the trend down.
@john: “The party prepared to steal the most off future generations gets the votes” it isnt the “Party” its us the voters stealing from our children and grand-children…Govn debt etc is only one corner of the debt triangle, private debt and company debt do the same thing IMHO…Then there are the other two major issues resource depletion and AGW…all these are stealing from future generations…
regards
December 24th, 2009 at 12:47 pm
It may well see NZ and Aussy becoming one country like the UK, probably will happen sooner than some of us realise. Will it matter then what part of the country family are living in, be it Auckland, Melbourne, or whatever?
December 24th, 2009 at 4:23 pm
Muzza, i’ve often wondered about this. If we merge with Aussie then a lot of our “overseas debt” would appear to disapear.
If a merger is going to happen then its probably best that we do it ASAP and enter in a position of relative strength rather than cap in hand after some sort of disaster.
I think joining Australia as a state would be a non-starter as we would in a too open way lose our nationhood and their would be an understandable reluctance for kiwis to think of ourselves as “Australian”.
I think some sort of messy EU type arrangement or Scotland/UK arrangement would be preferable – a kind of reverse devolution. Australia would have more control over us but with the quid pro quo of more responsibility. We keep our seat at the UN and are an independent country for sporting purposes – ie. still ‘kiwi’ from a psychological point of view but have the A$ and are merged economically, defense wise, and largely politically.
December 24th, 2009 at 4:33 pm
Ah geez , we’re not on that ” join Australia ” malarky again ? It was bad enough when Hickey sat down on the pavlova . …………. But now I’m really off my pudding !
December 30th, 2009 at 7:08 am
Frankly, housing is the only investment that makes any sense for middle-class New Zealanders; It is a hard asset, unlike the Ponzi-paper from the likes of Hanover. The “blue-rinse” crowd want to leave an inheritance that is convertible for their children. Outside of food production, there is nothing much that can be manufactured here that can’t be made in Vietnam, China, or India for a helluva lot less cost or bother.
The Kiwi$ appears to have hit some kind of resistance level and should increase back towards par with the US$, early next year. Our US cousins are throwing everything but the kitchen sink to keep house prices inflated: grants to first time buyers, MBS purchases, uncapping Freddie and Frannie funding. This QE/monetarizing can only end in tears.
December 30th, 2009 at 7:37 am
“Hard asset”…haaaaaarhahahaha…like 90ooo are rotting away and Key expects the immigrants to pay. Show me an old building and I will point out the decay, the subsidence, the rust, the lead paint, the asbestos roofing and many other timebombs. Not my idea of an investment unless the real value of the property is rising over the long term. Yes that does happen but not in all cases. Look at the towns where once a thriving industry created demand for property…but now all is decay and neglect. The wealth that went into the buildings and paid for the land was a waste. They don’t study inner city slum development for nothing!
December 30th, 2009 at 10:28 am
@Doug: I agree to a degree….in theory houses are pretty good asset purcheses for the un-sophisticated investor…I very much agree that that takes out the at best mediocre middlemen that add very little value to an investment. Where the theory drops down is lack of consideration of risk. Right now I (at least) consider NZ housing overvalued. By the traditional mark maybe as much as 40%…This mark is around 2.5 to 3.5 a household earnings. So a ratio 3.5:1 seems to be a good global indicator, we are at over 6:1. Then add in that investors are making little on their investmant as income per month, they are looking at capital gain and tax write downs/losses to make their money, yet we are already over 3.5:1 by a considerable margin…So housing to me isnt where I’d put money…
However considering other risky areas, it may not be that bad…take shares, un-realistic P/E ratios many based on consumer demand that has probably gone away for 10~20 years, ie a paradigm shift…companies have huge debt and have propped up earnings by decimating staff and dropping R&D short term OK, long term not OK…
So, Bonds……
Govn…quantitive easing….I dont think much more is worth saying, we agree here…but I agree with why they have done it, unemployment is 10%+ and growing…whats annoying is they have not fixed why it occured, indeed its worse, they have let the cause ie the banks, repeat it with even bigger risks…
Corporate…..when it matures you get shares, just look at Allied for that scenario that could well be played out over the next few years…
For me I’d put money in deposits or buy my own shares in areas like energy, and food anything essential to an economy eg pak-n-save…or that has an effective Govn monopoly…and sit back and ride this out/down….
I think ppl have got used to little risk high return times…now they are bitching that they can see the risk (its still there) but the returns have all gone away.
regards
December 30th, 2009 at 10:30 am
@wally: A recent example is OZ where NZers moved to the towns with high paying jobs in the mines so bought expensive houses in the surroundung areas only to see the jobs go and the houses become worthless….
You just have to wonder………
regards
December 30th, 2009 at 10:37 am
“…I’d put money in deposits or buy my own shares in areas like energy, and food anything essential to an economy…”..don’t leave out copper steven! Funny thing is, credit is essential to Noddyland going by the shiploads Bill is borrowing. Some inflation adjusted tax free Kiwibonds that return 4% pa …that would be nice.
December 30th, 2009 at 11:35 am
@Wally….LOL, copper….I would normally suggest trying to avoid volitle shares….but copper for a long term investment I think is very safe myself, its an essential to modern machinery…it is in short supply so should be a better bet than say gold…so I think you have a good bet…as good probably better than housing in NZ IMHO.
But who really knows….I have some shares and im keeping them for the long term, indeed as I can afford it buying a few more.
regards
January 1st, 2010 at 8:56 am
You should have bought more Steven. Up about $500 a ton since your post. Makes you wonder what will happen if and when the western slug economies emerge past their Keynesian splurging and sovereign debt issues. Stockpiles are high but would be eaten down in a matter of weeks if the world avoids a second dip into disaster. The screaming for a China collapse comes with a humbug warning that not all you hear is good for you. China set to become the 2nd wealthiest country and on track to pass the USA in less than 20 years. That would explain the noise demanding the China bubble collapse. 13 high speed rail systems planned. An expanding middle class. Maybe food production in NZ will be a winner if only the producers can cut out the middlemen.
January 30th, 2010 at 3:37 pm
Thank You 4 The Good Read I heard Credit Report is a quality site to get my free credit report and get my score 4 nothing. Anyone else tried them?