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A review of things you need to know before you sign off on Tuesday; housing markets at turning point; population becalmed & older, house building out of steam; dairy prices in focus, swaps await RBNZ signals, NZD slips, & more

Business / news
A review of things you need to know before you sign off on Tuesday; housing markets at turning point; population becalmed & older, house building out of steam; dairy prices in focus, swaps await RBNZ signals, NZD slips, & more

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
Non changes to report here today.

TERM DEPOSIT RATE CHANGES
No changes here either.

TURNING POINT
CoreLogic says more properties selling at a loss with housing market at a turning point.

BECALMED & OLDER
New Zealand's population is growing at its slowest in at least 36 years. It rose only +12,700 in the past year, about +35/day, as births slowed, deaths rose (from the pandemic) and the borders were shut. There are now 5,124,100 residents according to the latest update. The median age is now 38 years. It is now rising its fastest in ten years, only beaten on that measure during the 1998/99 recession. There are now less than four working-aged people (15-64) than those over 65, a new low. At the rate those over 65 'demand' services and benefits, it is clearly not sustainable.

WE'VE HAD THE START, NOW THE STOP
The BRANZ-Pacifecon annual forecast of the construction project pipeline sees an -$11 bln slump in housebuilding by 2025 which is a fall by more than a third, driving an overall construction fall of -$9 bln. But they still see infrastructure and non-residential construction activity staying 'solid'.

RENT FREEZE ADVOCATED
The Human Rights Commission is calling for a rent freeze and an increase in the Accommodation Supplement to help those hit hardest by the cost-of-living shocks to rent and food.

STILL GRINDING LOWER?
There is another dairy auction tomorrow morning. The past four have seen overall prices fall -15%. Tomorrow's auction is likely to continue that trend with WMP likely to be -4% lower and SMP likely to be as much as -7% lower. Convictions by analysts that the 2022/23 farm gate payout forecasts can be held will probably be tested.

'DISHONEST & MISLEADING'
The FMA has made an interim stop order that applies to Wisdom House Investment Partners Limited and Yuen Pok (Paul) Loo, to prohibit them from distributing any restricted communication that relates to the supply of a financial advice service to any person; and supplying a financial advice service to any person; and supplying the financial service of keeping, investing, administering, or managing money, securities, or investment portfolios on behalf of other persons. The FMA considers making this interim stop order is necessary to prevent Wisdom House and Paul Loo causing harm arising from what appears to be dishonest and misleading activities.

'INVESTING' IN GREEN HYDROGEN
New Zealand and Germany are to do some research on green hydrogen projects. It will see the NZ Government 'invest' $5 mln into three green hydrogen projects, and our research teams will get access to European green hydrogen research facilities and expertise. Funded through the Catalyst fund, each project will receive $2 million over three years. These are the development of safe, low-cost hydrogen storage (led by Professor Sally Brooker from the University of Otago), investigating ways of producing low-cost green hydrogen (led by Dr Aaron Marshall from the University of Canterbury), and the creation of a New Zealand-German platform for green hydrogen integration (led by Dr Jannik Haas from the University of Canterbury).

NO SURPRISES
In Australia, an unsurprising RBA set of minutes from the last meeting has most observers convinced they will raise their policy rate another +50 bps again in early September to 2.35%.

SWAP RATES HOLD (NERVOUSLY)
Wholesale swap rates are probably little-changed today at the short end but lower at the long end. The 90 day bank bill rate slipped -1 bp to 3.30% ahead of tomorrow's OCR review. The Australian 10 year bond yield is now at 3.26% and down a very sharp -15 bps since this time yesterday. China isn't helping. The China 10 year bond rate is at 2.67% and another -2 bps slip and a two year low. The NZ Government 10 year bond rate is now at 3.39%, down -9 bps from this morning, and now just below the earlier RBNZ fix for this bond which was down -11 bps to 3.40%. The UST 10 year is now at 2.78% and down -6 bps from this time yesterday.

EQUITIES MIXED
The S&P500 ended its Monday Wall Street session up +0.4%. Tokyo has opened its Tuesday session flat. Hong Kong has recovered +0.2% and Shanghai is up +0.3% in early trade. The ASX200 is up +0.6% in early afternoon trade. But the NZX50 has given up earlier gains to be trading marginally lower near the end.

GOLD SLIPS OFF FURTHER
In early Asian trade, gold fallen -US$18 to US$1,779/oz.

NZD SLIPS
The Kiwi dollar is much softer today, down nearly -¾c at 63.6 USc. Against the AUD we are little-changed at 90.6 AUc. Against the euro we are marginally softer at 62.6 euro cents. That means our TWI-5 is now back down at 72.

BITCOIN SLIPS TOO
Bitcoin is down -2.9% from this time yesterday to US$24,199. Volatility over the past 24 hours has been moderate at just under +/- 3.0%.

Daily exchange rates

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End of day UTC
Source: CoinDesk

Daily swap rates

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Opening daily rate
Source: NZFMA
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This soil moisture chart is animated here.

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76 Comments

David Chaston mentions our low population growth.  "..... it is clearly not sustainable......"

But an exponential growth, even starting gently, is what is really unsustainable.

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32

From the graph linked in the article, there's certainly a long term downward trend in birth rates, but I can't see that deaths are increasing "from the pandemic". They dropped significantly during lockdown, and are now returning to historical averages again.

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8

Lucky we held out till we had a nice mild variant to contend with and vaccines in arms. 

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13

Indeed. It's just a shame when people insist on making things sound worse than what they actually are.

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8

Still running 8-10% excess deaths.

903 dead in the 7 day period to the 31st July

Highest weekly deaths on record. Even bet the bad flu season on 2017

 

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4

At some point this will be updated. In a bit of searching I couldn't find anything useful with more recent data.

https://www.health.govt.nz/nz-health-statistics/health-statistics-and-d…

 

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Provisional data from StatsNZ page

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Cumulative excess deaths since the start of the pandemic are still negative. We're just catching up on deaths that were delayed by lockdowns:

https://ourworldindata.org/grapher/cumulative-excess-mortality-p-scores…

 

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3

So, 50,000 per year, or ~1% of the population? Guess we are going to have a life expectancy of 100+? Not really excessive at all.

Research has shown that our increased life expectancy measures are really only effective until 90, after which a rather consistent 25% of the remaining population die off per year.

As our population increases, that figure is only going to keep hitting 'record' numbers - first with the boomers aging and dying, then the rest after, until perhaps some point of inflection where the birth rate is so low the population rapidly contracts (i.e, China).

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2

Can understand the high rate. Not really much to be happy about isn't helping 

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as at the 31st Dec 2021 (when these stats are to) we had only 59 people that has died within 28 days of having covid, so that pandemic has very little to do with the death rate increasing back to normal, however there was a vaccination campaign that started in July...

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1

It is clear that New Zealand is running out of taxpayers to fund the care of the over-65s. Health care must remain free, so must residence in nursing homes. The area that can be trimmed is the age benefit we call NZ Superannuation. It should go to those who need it, not to those who don't. Winston Peters's greatest disservice to New Zealand was to engineer the removal of the surtax that kept NZ Super affordable. It must be brought back in some form, as Susan St John and Claire Dale have repeatedly proposed.

https://cdn.auckland.ac.nz/assets/business/about/our-research/research-…

Meanwhile, we need to fine-tune immigration and welcome into the country only those who whose skills ensure they will be highly paid, so pay lots of tax, and preferably under 25, so we'll get 40 years of tax out of them before they want to start drawing NZ Super too.

 

 

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16

"and preferably under 25" ..good luck with that!

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4

If someone moves to NZ they need to realize they are on their own. No bringing elderly relatives in to the country. If they want to be with them simply move back home.

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11

We need to raise the age of superannuation and start means-testing it, but politicians in both major parties are too scared of losing votes to do anything about it.

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12

And getting politically harder every year , as the % of older voters increases every year.

 

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2

Exactly. 

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0

Maybe set the voting age from 18 to 65?  

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8

And let's not focus on the 300,000 plus under 65's who are not motivated to work and pay tax.

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7

Landlords?

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15

Gosh that’s what makes nzdan comment even better!

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1

No way, I’m not going to be means tested after paying for every boomer to have a non-means tested benefit.

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6

Each to their own I guess. I aim to not need the government handout by the time I reach retirement (still about 30 years away) and I certainly don't want my kids to be paying for it they way I had to pay for their grandparents.

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3

You are not paying for the Boomers, they already paid it. Got to laugh, just wait to you get to retirement and put your hand out.

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10

LOL.  $20k super x average life expectancy of 82 (17 years) = $340k per person.  The super for a single person is $27k per year.

How does that compute?  Well the median pay in NZ is $56k.  $10k of that is PAYE.  So 34 years+ of the entire PAYE of a median wage earner to fund one retiree.  Got to laugh, all the Boomers did was take credit for their parent's hard work and slowly destroyed the country.  

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13

Nzdan, you are off your rocker mate, your claim is so ludicrous. I for one never got anything from my parents and I am sure I am not alone. Just keep making loser statements if that is what turns you on.

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8

Do you have a problem with my statistics?  Also, I didn't get anything from my parents either.  Let's be friends and we can gloat to one another about our medals.  

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2

Well one issue is you have assumed someone earns the median wage their entire life. That is a pretty obvious error. 

Just remember every person and therefore generation will act as they are incentivised to act. I dont think we can blame anyone for doing that.

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Yeah woops my bad.  What about those earning below the median wage who by retirement age manage to scrape enough payrises together to hit median wage?  

Our current superannuation model is just one big pig trough for a generation that voted in their own self interest when Muldoon campaigned on scrapping compulsory super in the 70's.  Can definitely blame them for doing that, particularly when you see the entitlement mentality that comes with non-means tested super.  

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1

You’re missing a few points:

- paye is not the only tax being collected. We have GST, petrol&road taxes, land tax, QE aka inflation which indirectly is a tax that can be used to contribute to pension funds. 

- today’s dollar worth way less vs 1988 dollar. The gov is supposed to invest tax revenue they collect from us today into productive assets that beat inflation via pension funds, so that would shave off some of the sum. 

- I believe life expectancy figures include deaths caused by natural causes only, so if you get killed by the mob at age of 60, you contribution is shared with other people.

- If you decide to emigrate, your tax contributions in most cases are taken from you.

 

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They already paid it? Sweet where is all this money then? 

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12

There was an article on Interest a couple of years ago highlighting that Boomers were on average looking like being net negative contributors. The universal pension was put in when taxes were higher and the older generations were in reciprocity actually providing well for the next generations. Including debt-free entry to the workforce, and affordable housing, and a generous welfare system. 

They cut taxes and much of that provision for following generations but retained the generous universal pension for themselves.

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0

I remember learning in school C economics about this issue 30 years ago, so your generation definitely knew about the problem. No doubt they are also the generation who voted National in last time with their policy of canceling super fund payments, that alone would have put us backwards by billions. It was always unreasonable to expect the generation after you to pay when life expectancy has increased so much and there is a population bulge, the fact you voted to stop super fund payments leaves me with little sympathy if the rules need to change. 

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8

No generation has "prefunded" their super contributions.  As usual you are showing your total ignorance.  Currently there is around 58 billion in the Superannuation fund, yet each year we already pay out 14 billion per annum in payments.  At most 4 years of super could be generously described as "pre-funded"

Each generation pays for the previous generations retirement.  Fortunately boomers had the foresight to treat future generations with empathy and generosity, and young generations will no doubt repay that kindness by continuing to pay for the boomers retirement.  

 

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13

If by paid for it you mean borrowed a lot of money and gave themselves tax cuts.

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2

I think there should be a death duty tax of at least 80%, you are born with nothing and when you are toes up you physically take nothing with you.

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4

Nice idea but it wouldnt work. The accountants would find ways to transfer wealth without paying for the rich.. just means the poor would give nothing to already poor kids.

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Am I right in thinking that the primary residence is exempt in the asset test to receive free nursing home care? Must be an opportunity to claw some of this back on sale or inheritance of the property. Tax payer is currently stumping up for care just so the kids can inherit the full value of their parents house. 

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3

Home is only exempt whilst your spouse remains alive and living in it. If your single/widowed house is included in means testing for rest home subsidy. Have to use up the equity before getting subsidy. 

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Thanks for clarifying. Luckily not something I've had to think about personally. 

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Throw it in a trust and let the plebs pay.

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Believe if going into residential care the govt will requisition all assets up to about 230k. Fair enough, absolutely. Problems arise though if the spouse remains active and then finds family assets are being stripped out leaving little income for them to go on. Still it does mean that those with  the history of saving & providing for themselves for retirement at least contribute those assets to their keep under care, as opposed to those who haven’t done that at all,  and instead land lock stock and barrel on the tax payer.

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3

So you expect people to survive retirement living off 3% set aside from their low wages?

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3

That seems to be a rhetorical question, but I fail to see the point you are making. Are you suggesting there is little point for any individual to save for their retirement?

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1

Agreed superannuation should be changed to stop it becoming ever more unaffordable.  It has got to the stage that the govt has to keep the immigration door wide open so young can pay for old.  However making Superannuation means tested other than the usual IRD income taxes is unworkable.  I for one would transfer all my wealth to my younger wife and my children (where it will go eventually) - wealthier Kiwis will find fiddles involving overseas wealth and ocean going yachts.  So how to save money?  Pay less and pay later.  Stop it being a promise at 65 or even any other concrete age - make it a commitment to an average of 12 years pension (or roughly aged 68 but recalculated annually).  Means tested benefits are bad - they reward the dishonest and penalise the honest.

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Everyone paid tax that was porportional to earnings whilst they worked (or were supposed to). So maybe the superannuation should be proportional to the tax you paid in your lifetime?

If you paid nothing a basic room and food is provided.

Sounds hard but it might motivate everyone to work a bit harder and contribute earlier in life.

I am definitely not a fan of means testing in retirement. Would mean those that lived off benefit prior to retirement would also get benefit in retirement. Why ever to work hard?

An alternative is the Universal Living Wage idea. We simply pay to everyone including retirees. If people have saved more wealth, have more skills (keep working) or have a personal pension then they get that top up

Whatever happens it needs to reflect what the person contributed. Not a hand out.

 

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2

Gift tax is implemented to catch people transferring wealth away to family and friends. If you try and defraud the government, you are risking spending time in court/jail. If too many get away with fraud, they need to spend more on enforcement. 

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0

Perhaps time to look after our younger population & stop encouraging them to jump on a plane and get out of here...

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11

I think that ship has sailed..

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7

The only ships sailing are boomer cruises...

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11

Immigration from Philippines and India for Health care workers will be encouraged (incentives?) as the rest homes swell with those demanding Boomers .

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9

My dentist is an Indian and he is bloody good. 

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2

My one is from Sth America, and by a country mile, she is the most happy, efficient & gentle dentist I have ever experienced. 

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2

The number of people in rest homes is surging. We will need 5 times as many beds by 2050. Who will be paying for that???

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0

NZ media is a bit dozey today. 

Australian beef exporters are on high alert following reports that China may temporarily suspend all meat imports from Australia and New Zealand due to concerns about foot and mouth disease.

Other exporters were also alarmed on Monday by a Chinese media report which said China was suspending imports of Australian grain, dairy and other agricultural products into the country, a move that would potentially damage tens of billions of dollars of business.

https://www.afr.com/world/asia/alarm-for-australian-beef-exporters-over…

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Most NZ media are always a bit dozy.

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1

Went to a trade fair last week in Saigon. Off the top of my head, I counted at least 7 producers of buffalo meat hustling for the market. 

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Out of interest why do you (still) refer to hcmc as saigon?

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0

That's what the locals call it, Saigon.

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5

Indeed.  HCMC is the commie re-name.  Nobody actually wants that.

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0

Good to see BRANZ-Pacifecon effectively confirming in a more quantitative way what I've been saying since early 2021 in terms of the looming residential construction slump. Although I think it will fall away more quickly, in 2023, than they are projecting.  

I need to check out their report, would be interesting to see what they think that means for employment in the sector, it would have to mean quite a lot in terms of reduction in employment.  

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1

Gold is crashing, $26 yesterday and another $18 today thats a lot of recent movement.

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1

But its an inflation hedge?

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1

Is that your definition of a crash in the gold market? 

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1

At the rate those over 65 'demand' services and benefits, it is clearly not sustainable.

Maybe we need to live more within our means and not 'demand' as much....

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1

Must be very confusing for them - they are sure their houses are worth zillions, but they are having trouble getting people to do work for them.  Why ever would that be????

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6

Well, here's the thing.  They're confused that "saving for retirement" also includes eating that money that you've saved, not just expecting the capital to be a never ending money tree.  Just like when they voted to scrap Labours compulsory super in the 1970s, they assumed an endless money tree of taxpayers would fund them.  Maybe that's why we're so reliant on immigration?  

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4

Oh, good ole WHIP getting taken to the cleaners. That doesn't surprise me. And I know of a few other financial advisers that will probably be heading the way of the FMA in the near future. 

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0

Was Bernard Hickeys recent "Buy now"  on housing advice??  sounded much like it.  Will FMA knock on his door?  Or are property debt grenade merchants exempted?

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5

A few 10% guaranteed return property developer funds would be welcome to vanish at the same time.

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2

NZ shaping up as a great place not to be for the next half-decade or so.

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7

old and poor, never a good combination

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0

Oh gawwwwd

Never mind, many of them have no idea about:

- how high prices are; and/or

- how hard it is to get finance

I've seen quite a few comments on FB that suggests this. 

When the developer tells them that little shoebox in a low value suburb is for sale for 800K, they tend to bawk...

 

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5

shameless spruiking

“They are very actively buying now,” he said. No they are just actively looking, from sales volumes bugger all people are buying.

Well at least there is plenty of choice for them at the moment. Good luck to them...

 

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1

Haha. Anything to try to keep house prices from crashing for a little bit longer.

Eventually the law of gravity always wins.

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