What happened Friday

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A review of things you need to know before you go home on Friday; Kiwi Bond rates rise, uncertainty dogs business sector, home loan affordability worse, BNPL in CFPB sights, swaps soft, NZD firm, & more

17th Dec 21, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
TSB raised a number of TD rates. Treasury also raised their Kiwi Bond rates. More here.

DENSE CLOUD OF UNCERTAINTY OVERHANGS 2022
Most firms are are confident about their future, although to a lesser degree. But most firms are not confident about the economy and where it is headed, and to a greater degree. Finding labour remains the biggest problem, and is getting worse, while freight disruptions are also having a growing impact. This is all according to the December ANZ Business Confidence survey. Of concern is that residential construction intentions, and ease of credit are tightening fast. Inflation expectations are still rising, while cost expectations and pricing intentions bounce about at very high levels, observes ANZ. Firms are now carrying more inventory and even ordering earlier to ensure they have supply. This is likely to compound existing inflation pressures as firms as are incentivised to “pay up” to secure inventory. More here.

TOUGHER GETTING IN
First-home buyer home loan affordability has worsened to close out the year. Prices at the bottom of the market continued to rise steeply in November pushing home ownership further out of reach for those on average wages. And this is before the full impact of the CCCFA credit restrictions have been felt. A sharp credit crunch has been set in place by this new regulation.

FREE BNZ MOBILE BANKING VIA VODAFONE DEAL
Through a deal with Vodafone, BNZ is claiming to be the first bank to offer free mobile banking in New Zealand. BNZ says from today no mobile data will be used anytime a Vodafone customer uses the BNZ app, BNZ online banking or the BNZ website on their mobile phone.

P2P TRUSTEE WARNED
The FMA has formally warned Squirrel P2P Trustee for failing to carry out certain obligations as a custodian. The entity provides a custodial service for the peer-to-peer lending service of Squirrel Money Limited. Squirrel Money had 1,416 P2P clients and $35.5 mln of investor funds, as at 31 March 2021. Although this warning is somewhat technical in nature, the FMA says "assurance engagements are a critical backstop to ensure a custodian is fulfilling its role and investor money is being held appropriately" and it should have known the rules which were breached between 2016 and 2020.

A LATE BURST IN FUNDING FOR LENDING PROGRAM
Over the past week or so, two banks have dipped into the Funding For Lending program offered by the RBNZ, one for $200 mln, the other for $500 mln. If readers know which banks are drawing on this stimulus credit, please contact us.

BNPL IN CFPB SIGHTS
An American regulator said it was investigating the buy-now, pay-later industry with an investigation into the largest operators there, which includes two of Australia's largest (AfterPay and Zip). Shares in both fell heavily after the announcement. The US regulator is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.

LOCAL PANDEMIC UPDATE
In Australia, pandemic cases in Victoria were 1503 reported today. There are now 12,578 active cases in the state - and there were another 7 deaths today. In NSW there were 2213 new community cases reported today, and another big jump, with 9,569 active locally acquired cases, but only one death. Queensland is reporting seven new cases. The ACT has 20 new cases. Overall in Australia, 89.8% of eligible Aussies are fully vaccinated, plus 3.9% have now had one shot so far. In contrast, there were three cases in New Zealand at the border, and 76 new community cases today. Now 90.2% are double vaxxed, 94.3% of Kiwis nationally aged 12+ have had at least one vaccination, and the equivalent Australian rate is now at 92.7% of all aged 12+.

GOLD FIRMER
In early Asian trading, gold is at US$1802 and +US$24 higher than this time yesterday, or +1.3%.

EQUITIES MIXED
Earlier today Wall Street closed lower with the S&P500 down -0.9% in their Thursday trade. Tokyo is down -0.9% in opening trade and heading for a weekly rise of +0.3%. Hong Kong is down -0.6% in their opening trade today and heading for a sharp -3.7% retreat. Shanghai is down -0.4% in their opening trades and if that holds will be down -0.7% this week. The ASX200 is up +0.6% in early afternoon trade and with luck could end the week flat. And the NZX50 is flat in late trade today and will end its week down -0.5%.

SWAPS FIRM
We don't have today's closing swap rates yet. They are likely to be soft. The 90 day bank bill rate is up a sharp +1 bp at 0.93%. The Australian Govt ten year benchmark bond rate is unchanged at 1.61%. The China Govt 10yr is little-changed at 2.88%. The New Zealand Govt 10 year bond rate is now at 2.27% and down -3 bps and still below the earlier RBNZ fix for that 10yr rate at 2.31% (-3 bps)t. The US Govt ten year is now at 1.43% and -4 bps softer.

NZ DOLLAR FIRMS
The Kiwi dollar is now at 67.9 USc and marginally firmer from this time yesterday. Against the Aussie we are also marginally firmer at 94.6 AUc. Against the euro we are still at 60 euro cents. That means the TWI-5 is a little higher at 72.5.

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BITCOIN FIRMS AGAIN
The bitcoin price has fallen by -2.5% to US$47,865 from the level this time yesterday. Volatility over that period has been moderate at just over +/- 2.1%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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37 Comments

by Justa comment | 17th Dec 21, 4:41pm 1639712474

Interesting move from BNZ with no data required for Vodafone users on their phones. There are stiil many mobile users that dont use data, especially older people. Nice move by BNZ.

by bender | 17th Dec 21, 6:14pm 1639718043

Anything to keep them away from the bank...er, the "store"

by Hardly | 17th Dec 21, 6:28pm 1639718936

Not really, presumably banking apps use very little data since they deal in numbers and not media.

by Justa comment | 17th Dec 21, 7:11pm 1639721462

True, but many older users have NO data, so this will be binary for them.

by Brock Landers | 17th Dec 21, 5:07pm 1639714077

Another "DGM" day at the auctions.

by Vivid | 17th Dec 21, 5:43pm 1639716189

DGM?

by donny11 | 17th Dec 21, 5:44pm 1639716285

doom and gloom merchant

by Waikatohome | 17th Dec 21, 5:52pm 1639716720

Yup, 27% sale rate in the main auction room at B&T today.

by HouseMouse | 17th Dec 21, 6:34pm 1639719286

Another shocker.

by Waikatohome | 17th Dec 21, 7:01pm 1639720877

I asked this earlier today but got no answers. Why do people make pre-auction offers if the property is still going to auction ? Several houses have sold this week with no further bids in the room above the accepted pre auction offer, surely this means the buyer has over paid and should have waited to bid at the auction?

by bw | 17th Dec 21, 7:21pm 1639722093

Why that is allowed is beyond me.

Personally, if I made a pre-auction bid and say "Take it or leave it, now" but that doesn't happen here.

Buyers are routinely coerced into the 'fact' that the property 'has to go to auction; that's what the vendors want' - and still use your bid as the highest offer - and if no one over-bids you on the day, you win! (Your bid remains firm, by the way. No second thoughts for you on the day)

It's lunacy if you ask me. And I'm sure is illegal somewhere. But not here. It's what we do - get used to it.

by Waikatohome | 17th Dec 21, 7:24pm 1639722299

That’s what I think. The whole point of negotiation is to only concede if you get something back. I would only make an offer if they took the property off the market. What benefit does a pre auction bid have for the buyer? They could be over paying by a 100k or more.

by Albert2020 | 17th Dec 21, 8:23pm 1639725805

It potentially takes a few bidders out of the race if they didn’t get their due diligence done in time

by Solid_Granite | 17th Dec 21, 9:10pm 1639728605

My thoughts is that there are still a number of home buyers out there with the mindset of competing with everyone else for a house. After all it was just a few months ago that things were mad. And you can't expect everyone to keep up with financial news.

I'd expect weary first home buyers jumped at the chance to place an offer before the bidding even started in order to FINALLY secure a house after months or years of losing.

by redcows1 | 17th Dec 21, 7:34pm 1639722890

There was a good article in stuff the other day from the other direction about a guy who bought a house for $925k. Kicker was that he was prepared to go to $1m but there was no other bids.

So is the value of the property $1m which he was prepared to pay as market rate or is it the $925 discount price he paid.

How'd the vendor feel?

by bw | 17th Dec 21, 7:43pm 1639723434

$925k.

We've all been to an auction, whether it be for a car, a painting, furniture or a house that we've made up our minds what our top price is. And most time, the process makes 'us' overdo that. But whatever the asset sells for - that's market price; it's current value.

Market price isn't a valuation, an opinion or a guess, it's what something sells for and most importantly, can be paid for.

(But I know you know all of the that! And the real question should be, "Why did he pay so much? Why didn't he offer $500k?")

by Albert2020 | 17th Dec 21, 8:22pm 1639725736

You can cancel your bid prior to the opening of the auction.

by bw | 17th Dec 21, 8:32pm 1639726360

Which entirely defeats the objective of taking it to auction, then?

The last time I witness one of these shams, it started with something like "I have bid from the floor of $925,000. Do have any improvement on that?"

Now of course, the real estate agent was squashed up tight against the prior-to-auction bidder, cajoling them along and reassuring them that "You've got this!", and if they were told "Look. You can withdraw your bid before this get going" I'd be amazed!

I repeat. The whole thing is a scam; designed to entrap the unwary and those who might transact a property one every 7 years.

Do you know how auctions are run i other countries? They start with, "Ok, ladies and gentlemen. Do I have $925,000? No? Ok well $900,000?"

That is an auction process at its best. We do not have that here. What we have is a corrupte version of auctioneering.

by Carlos67 | 17th Dec 21, 7:29pm 1639722596

No because its the seller that controls the price not the buyer. Basically both parties have agreed on a minimum price, the auction opens at this price and if anyone want to pay more they bid from there. My partner sold her house like this and in the end the original people with the opening offer got pipped to the post. Its not based purely on price, there are condition of sale that are signed off on before the auction starts that have to be agreed to by the seller. Auctions are only fun when you love the house and have plenty of money to simply smash the other buyers. I paid $55K over the next bidder for my place and ended up bidding against the vendor, didn't care, I knew what they wanted and met the price.

by Waikatohome | 17th Dec 21, 7:31pm 1639722718

The market decides the price. If only one person is prepared to buy then the seller must drop their price. I have negotiated down asking prices several times.

by Carlos67 | 17th Dec 21, 8:00pm 1639724411

The market doesn't really determine the price its a house not a car. I was prepared to pay $100K just for the view and the house was totally unique. Many other people probably couldn't care less about the view or the private garden you can sunbathe naked in the suburbs but I was prepared to pay the extra.

by bw | 17th Dec 21, 8:06pm 1639724762

Again. Totally wrong.

Any asset for sale, however it's being sold, is a quantifiable entity. Be that a car or a house.

Everyone knows 'it has sea views' and what those are or aren't worth (How's that rust going in all your fixtures and fittings because you are so close to the salt water!) and the price paid mostly reflect what the buyer expert be able to recoup down the line (those sea views) whether THEY want them or not.

by Dick Mortensen | 18th Dec 21, 5:06am 1639757191

However, the market has been manipulated by central bank policies. When interest rates are lower than inflation, then speculation ensures.

by bw | 17th Dec 21, 7:52pm 1639723922

"seller that controls the price not the buyer."

Totally wrong. But that's what we, and most predominantly real estate agents, are taught.

The only party that controls anything is the party that CAN pay. In most cases today, that's the lender - the bank who facilitate the finance to a transaction. Take them out of the equations, and whatever the Seller thinks he controls - he doesn't.

All the vendor can control is ownership of the asset. Does he sell today, or not? And in asking themselves that question they are making a judgements about the future. The markets and most importantly, their own.

by Carlos67 | 17th Dec 21, 7:57pm 1639724227

Not really I had some silly take it or leave it offers on my last place and crap like its valid to 5pm. It was see you later dickhead. Ultimately the seller determines the price, if its not what they want then they decide to hold or not.

by bw | 17th Dec 21, 8:17pm 1639725422

The seller determines IF they want to sell or not, not what the transaction price is.

Let's say you've just lost your job; the job market in Tauranga for you is none existent, and you have bills/mortgages/school fees etc to pay. And you are made an offer below what you want but enough to pay your debtors. What are you going to do? "See you later" might be a bad choice.

Don't confuse your personal circumstances (retired and downsized to a place that's mortgage free) to what most others have to face. Debt makes decision-making less than easy, and given the amount of Debt we have in the Private Sector, that decision-making is going to get harder.

by jo147 | 17th Dec 21, 7:35pm 1639722925

Assuming this was a serious question...

In a hot market as we've had for last 3 to 5 years... people make a pre auction offer in the hope of bringing auction forward so less people will see house and competition will reduce. It you see it within 24 hrs of going on market and vendor accepts your offer and auction happens within 2 days... then less people will have seen it. Makes no sense in a buyers market. Not sure it ever worked that well. Anyone get a win doing this?

by Waikatohome | 17th Dec 21, 7:44pm 1639723484

It was a serious question. I couldn’t see the advantage for the buyer but I suppose it could work in a hot market by limiting marketing time. I only buy through negotiation. I bought my current house after the tender process received no offers. I got it for below the original offers above price.

by printer8 | 17th Dec 21, 8:28pm 1639726108

Waikato in answer to your original question.

Simple.

At auction the sale is unconditional.

In a pre-auction offer the potential purchaser could include conditions (e.g. financial) which would otherwise restrict them bidding unconditionally at auction.

The vendor can accept that offer on the condition that they do not get a better / unconditional offer at auction.

Such an agreement is to the benefit of both potential purchaser and vendor.

Absolutely nothing improper or illegal about such an arrangement.

by bw | 17th Dec 21, 8:41pm 1639726885

"At auction the sale is unconditional."

Hit the nail on the head. If you have a dodgy property to sell, auction it. The last thing you'd want is someone doing their Due Diligence in the calm of any cooling-down period. And correct me if I'm wrong, but any Buyer can go "Unconditional" at any time they like? ie: They could make an Unconditional Bid before the ensuing sham auction process?

by printer8 | 17th Dec 21, 9:10pm 1639728644

Have you actually bought properties at auction?

Firstly

No, if the vendor has inserted a condition related to going to auction the purchaser can not then preempt that by going unconditional.

Secondly, on Due Diligence

I think most potential purchasers’ lawyers would most strongly advise ensuring due diligence prior to any bid at auction. Due diligence is common practice by potential purchasers who will be seriously bidding.

From my experience at auctions one needs firstly to confirm the finance from the bank for that specific property as per the condition of any pre-approval; this will involve assurances regarding the property’s valuation. If a LIM report is not provided by the vendor then a search of council files can be done at no cost and one can have a builder undertake an inspection at reasonable - or if a friend at no - cost.

by bw | 17th Dec 21, 6:27pm 1639718841

DGM? On the contrary!

That's fabulous news.

It means 70% of vendors know they are going to get higher prices in the future, and there's no need to buckle to current buyers' opportunistic bids today.

It's all up from here....

All the NZ economy needs is a bit more Debt to kick-start Demand satisfaction. The UK is on to it.

Bank of England opens the door to bigger mortgages.

https://www.telegraph.co.uk/business/2021/12/13/bank-england-opens-door…

by Mountie | 17th Dec 21, 6:48pm 1639720116

What bids? There pretty much weren't any, let alone opportunistic ones.

by bw | 17th Dec 21, 7:22pm 1639722167

Smart people, those vendors that hold back, aren't they!

by redcows1 | 17th Dec 21, 7:16pm 1639721789

Soil moisture update looks about right now. Nice heeding toward summer.

by Let me be Frank | 17th Dec 21, 8:22pm 1639725739

Except we are almost one 1/3 through summer

by redcows1 | 17th Dec 21, 7:23pm 1639722224

"And this is before the full impact of the CCCFA credit restrictions have been felt. A sharp credit crunch has been set in place by this new regulation"

Is that really a fair comment. So far it seems to me more hyperbole based on ancedotel musings from some with lots to lose from a little light shining in on current practices.