What happened Thursday

Business / news

A review of things you need to know before you sign off on Thursday; final main bank raises its floating rate, food prices up, QV sees fast-falling home values, no sign of mortgage stress yet, swaps stable, NZD holds, & more

13th Oct 22, 3:59pm by David Chaston

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
Kiwibank raised its floating rate today by +50 bps to 7.0%, the lowest of all the main banks. Kookmin Bank raised fixed rates, Heretaunga Building Society raised its floating rate.

SAVINGS & TERM DEPOSIT RATE CHANGES
Kiwibank raised its 30 day Notice Saver by +40 bps to 2.80% and its 90 day Notice Saver by +25 bps to 3.50%. But it raised all its online call accounts to 2.60% which was +50 bps for retail clients and +60 bps for business clients. Term deposit rates were raised by Kookmin Bank and Heretaunga Building Society as well.

HIGHER THAN EXPECTED
Food price rises stayed at a 13-year high in September at 8.3% with soaring fruit and vegetable prices a key contributor to an overall food price inflation figure that's come in much higher than economists expected. Food prices make up 19% of the CPI data so today's update is likely to keep next week's CPI data release also higher than expected.

PRESSURE EASES FOR RENTERS
Stats NZ reported today that pressure on housing rental rates seems to be easing. The said in September 2022 compared with September 2021 the index for the stock measure of rental property prices (all units) increased 4.1% whereas the the index for the flow measure of rental property prices (those that turned over recently) decreased -1.3%. Rent increases vanished in Auckland in September, but are still rising fast in the South Island.

THE START OF A LONGER RETREAT
QV said the average value of NZ homes has dropped more than -$100,000 since January. Auckland and Wellington were both down almost -$190,000 in the same period. They say the average decline in average dwelling values on an annual basis is the first in more than a decade - and they expect them to keep falling.

RISING YIELDS
There was another well supported NZGB bond tender today for $400 mln which brought 105 bids worth $791 mln. 24 bidders won something from the $200 available for the April 2025 offer and got a yield of 4.37%, up from 3.66% 4 months ago. The $150 mln May 2032 offer was won by 24 bids at 4.51%, up from 4.20% two weeks ago. And the final $50 mln was won by 12 bids at 4.89%, up from 4.52% two weeks ago.

RESILIENT
NZ Bankers' Association figures show that as of June only a little over 1% of those with a mortgage were behind with their payments - a percentage that's actually dropped in the past six months. In contrast, nearly half of mortgage holders are still ahead with repayments.

SWAP RATES STILL FIRM
Wholesale swap rates are firmer on local trends yet again although they may be lesser than recent rises. The key real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +3 bps at 3.95% and back at its highest since January 2009. The Australian 10 year bond yield is now at 4.02% and up +2 bps from yesterday. The China 10 year bond rate is unchanged at 2.76%. The NZ Government 10 year bond rate is now at 4.52%, and down -2 bps but still above the earlier RBNZ fix for this bond at 4.49% which was down -2 bps from this time yesterday. The UST 10 year is now at 3.92% and down -3 bps from this time yesterday.

EQUITIES IN SUBDUED TRADE
Wall Street ended lower today with the S&P500 down -0.3% at their Wednesday close with a late sell-down. Tokyo is down -0.4% at their opening. Hong Kong started today down just marginally. And Shanghai has started down -0.2%. The ASX200 is up +0.3 in early afternoon trade, but the NZX50 is down -0.2%.

GOLD HOLDS
In early Asian trade, gold is at US$1672/oz and up +US$5 from this time yesterday.

NZD FIRMISH
The Kiwi dollar has firmed +20 bps from this time yesterday to be just over 56.1 USc. Against the AUD we are more than +¼c firmer at 89.3 AUc. Against the euro we are up a similar amount, now at 57.8 euro cents. That all means our TWI-5 is at 66.9 and up +30 bps.

BITCOIN HOLDS
Bitcoin is marginally firmer today, now at US$19,126 and up +0.3% this time yesterday. Volatility over the past 24 hours was low at just over +/- 0.6%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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75 Comments

by J.C. | 13th Oct 22, 7:16pm 1665641817

They say the average decline in average dwelling values on an annual basis is the first in more than a decade - and they expect them to keep falling.

Obviously, in nominal terms, historically significant. Psychologcally a big hit. How that flows through to consumer sentiment / behavior is crucial for the economy.

by bw | 13th Oct 22, 4:14pm 1665630851

It's happening across the Globe. Maybe for individually different reasons, but the underlying rationale is the increasing cost of debt.

UK’s 13-year housing market boom to end. Homeowners will struggle to make mortgage repayments and repossessions will rise next year as soaring interest rates and falling prices mark the end of the UK’s 13-year housing market boom, according to a sobering report from the Royal Institution of Chartered Surveyors

by J.C. | 13th Oct 22, 4:20pm 1665631202

by Fitzgerald | 13th Oct 22, 5:33pm 1665635609

If the UK Central Bank can't control it, why do we expect the RBNZ to control it?

by Pa1nter | 13th Oct 22, 6:28pm 1665638900

Some believe if we just replaced Orr and the finance minister, she'd be tickity boo.

Little did they know, she was already all over rover.

by False economies | 13th Oct 22, 8:42pm 1665646941

Or the increasing cost of energy?

by Future | 13th Oct 22, 4:14pm 1665630893

Kiwibank raised its floating rate today by +50 bps to 7.0%, the lowest of all the main banks.

7% sounds cheap.

by Yvil | 13th Oct 22, 4:19pm 1665631189

You can get a lot cheaper than 7% by fixing

by Future | 13th Oct 22, 4:33pm 1665632007

Even cheaper by not buying.

by Nifty1 | 13th Oct 22, 4:39pm 1665632388

Just got that thing called rent to pay then and help your landlord pay their mortgage. That, or you live with your parents & watch coronation street with them. Better futures everyone.

by chebbo | 13th Oct 22, 4:39pm 1665632352

Spending $530 a week in rent, saving $2500 a week by not buying. Sounds like a sweet deal to me.

by Nifty1 | 13th Oct 22, 5:04pm 1665633850

Bitter sweet, just wait until you get kicked out with no where to go & are back lining up - needing to provide a new landlord/property manager with your life history trying to get another rental. God forbid you don't have a pet or any kids...

Better Futures everyone.

by chebbo | 13th Oct 22, 5:10pm 1665634229

By the time I get kicked out I'll have a good deposit saved up to buy a house, probably off a landlord who has finally figured out how much money they're losing on their rental.

by Nifty1 | 13th Oct 22, 5:17pm 1665634667

Yeah how long have you been saying that for? It's easy for the years to fly by and you've made no moves as you've been stuck in fear...

by chebbo | 13th Oct 22, 5:17pm 1665634660

Hypothetical situation, but definitely the choice I'd be making right now.

by Nifty1 | 13th Oct 22, 5:19pm 1665634747

Ahh right now all of a sudden hypothetical...

by chebbo | 13th Oct 22, 5:21pm 1665634884

Does it matter? Point still stands.

by Nifty1 | 13th Oct 22, 5:29pm 1665635348

Yeah it matters if you're making stuff up for the purpose of an arguement...

Spending $530 a week in rent, saving $2500 a week by not buying

Where'd you get these figures from? Just hypothetically out of your a***?

by chebbo | 13th Oct 22, 5:33pm 1665635614

That is the average NZ weeky rent, and the average weekly fall in house prices according to QV. Both current.

by Fitzgerald | 13th Oct 22, 5:36pm 1665635809

$530 would be a pretty average rent for a young professional.

$2500 a week is pretty similar to what you'd get if you used the most recent HPI figures and combined them with average Auckland house prices. Sounds about right.

by Nifty1 | 13th Oct 22, 5:56pm 1665637004

How about instead of talking random averages, present real situations? You could be paying $530 rent, spending all your money and doing no investing... HPI decreases ain't going to get you anywhere. For many average people, this probably the case.

For you - has it ever been a good time to buy? I put it to anyone here, look back at interest.co.nz comments going years back and you'll see exactly the same type of arguments...often by the same people.

by chebbo | 13th Oct 22, 6:31pm 1665639108

This is a real situation. You're presenting a false dilemma. The options are not "buy a house right now" or "rent for life". When house prices are falling, renting makes perfect sense even if you have the option to buy. I'm not sure how this is difficult to understand.

by Nifty1 | 13th Oct 22, 6:43pm 1665639796

Mate you said it was hypothetical, that's not a real situation?

by chebbo | 13th Oct 22, 6:52pm 1665640360

Were going round in circles here. Happy bidding anyways.

by Nifty1 | 13th Oct 22, 7:09pm 1665641358

Happy being average...hypothetically

by Pa1nter | 13th Oct 22, 6:33pm 1665639183

Oh shush you big meanie, celebrating renting being an upside is a bit of a unicorn.

When people lose actual jobs it'll hurt a lot worse than a decline on someone's balance sheet. Weird how that's virtually never talked about, and it's actual pain, but people want to hand wring when people lose cap gains.

It's all about morals yo.

by Pagz | 13th Oct 22, 7:37pm 1665643057

Having recently lined up and given life history to several strangers (and with 3 kids) I couldn't agree more...

We have gone very wrong somewhere.

by Nifty1 | 13th Oct 22, 7:49pm 1665643740

Thanks for providing a real situation...

by Nzdan | 14th Oct 22, 7:47am 1665686835

Agreed. I recall being turfed out by a landlord who wanted to sell their OO and move into a rental. In the middle of the post CHCH Earthquake pandemonium. Let's just say, queues out the street and rent bidding. Extraordinary time of course, but an eye opener.

by lonewolfnz | 13th Oct 22, 6:51pm 1665640313

Some of us sold down our assets earlier this year and paid down off our mortgages - that's a nice third option :)

Will be interesting when the dust settles and my term deposits end in January. Might be some bargains in the market.

by Yvil | 13th Oct 22, 5:02pm 1665633746

"Even cheaper by not buying"

My parents never bought, 50+ years of renting, so they have nothing to show for all that money spent! I can assure you they would be far, far, far better off if they bought. For someone who chose the moniker "Future", your thinking is very short-sighted.

by chebbo | 13th Oct 22, 5:03pm 1665633824

Also short-sighted: thinking that a good decision 50+ years ago is still the right one to make now.

by J.C. | 13th Oct 22, 5:12pm 1665634359

Yes Chebs. It's not the 1970s anymore. Boomers need to get with the program.

by Yvil | 13th Oct 22, 5:18pm 1665634725

I'm not a boomer, would you like it if I called you guys young & dumb?

by Pa1nter | 13th Oct 22, 6:35pm 1665639308

Pfft, living in the past.

Houses are useless and valueless, what can you even do with them? Compared to sweet, sweet crypto.

Digital world>physical items

by lonewolfnz | 13th Oct 22, 6:54pm 1665640446

Its interesting actually. As a hobby I dipped back into crypto after the big crash. Its actually done really well (crypto was the top asset in Q3)

Even just the hobby sized holdings are generating six figures in yields. More fun than playing video games.

Still 85% in cash though (but stable coins in USD denominations are looking tasty too)

by Pa1nter | 13th Oct 22, 7:29pm 1665642563

Oh yeah, I made some decent bank spotting a few things before they blew up. Money made, and absolutely nothing of tangible value occured, in a way JC is right, it makes having to produce something for money by doing or creating something kinda dumb.

Still can't see an actual business case for it that has it surpassing fiat though. Well, outside of a central bank digital currency, and average Joe investor won't be striking it rich getting on the ground floor for that.

by Yvil | 13th Oct 22, 5:25pm 1665635145

Chebbo, you used to post intelligent comments. Buying vs renting has little to do wirh where the market is heading, it's as simple as:

Would you rather pay for 25 years to live somewhere and have nothing at all in the end

Or would you rather pay for 25 years to live somewhere and have your own house in the end?

by chebbo | 13th Oct 22, 5:34pm 1665635678

False dilemma. I'd rather pay for 25 years and end up owning something worth more than - or at least as much as - what I originally paid.

by Yvil | 13th Oct 22, 7:00pm 1665640847

Chebbo, it's not a false dilemma, it a very real situation which will have a massive effect on your life.

Thanks for admitting you would rather own your house after the 25 years, at which point it will of course be worth a lot more than today, thanks to 25 years of inflation.

by meh | 13th Oct 22, 7:59pm 1665644348

It's "worth" no more than the day it was built, only the price or value of the tokens has changed.

Inflation in house prices good, inflation in goods prices bad. Yet a house is really only a good, a product.

There were and are many cultures that don't have this fixation on ownership and possession of more than one needs, and it doesn't negatively affect their lives. Is it just a weird construct of western civilization that we choose to impose on others? And it's even weirder that we're up in arms over inflation destroying our purchasing power, but an ever increasing number of tokens to own a home makes us rich.

by Fitzgerald | 13th Oct 22, 8:04pm 1665644699

But you are ignoring all the other options:

1) rent for one year, own for 24 years

2) rent for two years, own for 23 years

3) rent for three years, own for 22 years

4) rent for 4 years, own for 21 years

5) rent for 5 years, own for 20 years

Cut and paste...

24) rent for 24 years, own for 1 year.

Timing the market is more important than time in the market.

by Yvil | 13th Oct 22, 9:25pm 1665649503

Poor young fool, thinks he knows better than all the old proven investors.

For your own sake I hope you'll find some humility to learn from seasoned investors, otherwise you'll end up being a poor old fool, financially poor, that is.

by Fitzgerald | 14th Oct 22, 2:12pm 1665709946

I've spent many, many, hours learning from "seasoned investors". Guarantee that I've learnt more than you, Frankie Foo.

I've read almost every thread on the Property Talk forum. It spans back a long way, through lots of changes in the property cycle. It is a contemporaneous account of how our property market has functioned through time, written (mostly) by real estate investors.

I've seen the booms and the busts, the rock stars that turned out to be false idols, and the property hysterias that have happened in the past.

But the future is always unknown. It may turn out nothing like the past... in which case there is no such thing as a "seasoned investors' or 'proven investors'. Taleb would say that a lot of investing success is due to luck, and that we look at it through a survivorship bias lense.

by Pa1nter | 14th Oct 22, 5:08am 1665677335

Really good investors probably don't go on propertytalk, that's likely for the aspirationally wealthy and capital gain braggarts.

There's definitely differences in acumen amoung investors, it's likely that assumption that anyone can do and it's just timing that ironically attracts the unskilled and incompetent.

by Fitzgerald | 14th Oct 22, 9:31am 1665693078

Most of what property investors call "acumen" or "skill" has really just been blind luck.

A rising tide lifts all boats.

Funny that you'd make such sweeping judgements about the posters on Property Talk, when it is clear that you are unfamiliar with the forum.

Funny that Yvil tries to dismiss my [obvious] logic with ad hominem, and then you dismiss the vast collective knowledge contained with Property Talk with a sweeping, blind, generalization.

Now't so blind as those who won't see.

by Nzdan | 14th Oct 22, 3:03pm 1665713019

"Cheers, Donna"

by HouseMouse | 13th Oct 22, 5:42pm 1665636138

I agree Yvil.

I used to think like Chebbo.

It only really works if you are ultra disciplined and save money hard / invest. Few do.

Having said that, it’s easier said than done buying a house, even with prices down circa 20%.

by J.C. | 13th Oct 22, 5:50pm 1665636650

You might be surprised HM. The younger generations think differently. They also seem to have a better understanding of sound money than the old farts who seem to be firm believers in the fiat scam.

by Pa1nter | 13th Oct 22, 6:40pm 1665639638

It's not really about being a "believer". Fiat money's just the most convenient, most common medium of trade.

As soon as it's magic beans, silver coins or something else people want to use, whatever.

Expending energy in what you think the best form of money is, is only distracting you from generating actual value, no matter how you're counting it.

If I had 50 grand, I'd be putting that to work, not shuffling it from one measure of store to another. Some people get rich that way, but in the way some people get rich being youtubers.

by J.C. | 13th Oct 22, 7:10pm 1665641430

It's not really about being a "believer". Fiat money's just the most convenient, most common medium of trade.

This is true. Fiat is a useful means of exchange and good for credit creation for productive purposes.

BTW, NZDRUB (that's the Russian ruble cross), is down 28% in the past 12 months.

Any idea why that is?

by Pa1nter | 13th Oct 22, 7:25pm 1665642337

Way less people are exporting things to Russia, but their main exports are a highly tradeable global commodity?

Something about a war, people are cross at Russia, etc.

What you reckon their long term prospects are, compared to NZ? That's likely a far more beneficial thing to try to determine, than today's or this year's movements.

by Grattaway | 13th Oct 22, 5:47pm 1665636420

scary part is Chebbo might be right - in our new socialist paradise all housing will be provided by the state

by J.C. | 13th Oct 22, 5:51pm 1665636705

You will own nothing and be happy.

by meh | 13th Oct 22, 6:27pm 1665638851

Many spiritual teachings suggest this is the biggest issue of our materialistic and egoic human world. When we've become owned by our possessions and the neverending quest for more is an illusion of happiness.

If course I'm wary when it's the WEF directing the agenda, much like their forebears did when distorting teachings of the Tao to create laissez-faire economics.

by Pa1nter | 13th Oct 22, 6:43pm 1665639833

That is actually true in that there's a level of comfort you can hit, and everything above that is bullshit and jellybeans. The new Merc becomes an old Merc after only a few months, and a new 75" TV still has bugger all content of value worth watching on it, over a 42".

That said, it's something people need to work out themselves. I really can't see the future being much more than a bleak existence for most on some sort of UBI and government services.

by meh | 13th Oct 22, 7:31pm 1665642713

Yep and it's a tricky one. There's many now who have worked hard and accumulated wealth for their retirement but due to ailing health are living a bleak existence now. There are many youth disillusioned and overwhelmed but are told just getting a job will somehow solve this.

And there are many stories of people on their deathbed realising that working harder, saving more, having more baubles and trinkets and bigger houses didn't make them happier or improve their quality of living. Plus the studies that suggest over a certain level of income doesn't improve happiness.

I think there is an issue though with many being unable to discover this themselves. An education system that I liken to an industrial factory churning out workers etc. An economic narrative and imaging bombarding impressionable youth with a story of "success" and monetary wealth. A system that demands more and that enoughness level of income doesn't provide a home or quality family time.

I think there's many that see the hypocrisy, the contradictions, the power imbalances the inequities and inequality, and don't want to be a part of it and are unable to find another way. It would explain a lot of the mental health issues.

by Pa1nter | 13th Oct 22, 7:42pm 1665643373

I see the boomers as a generation who worked hard for their retirement. The retirement was the finish line, you can do whatever you want, bliss. Only they get there and they've got a rotten prostate and lack the desire to do too much.

The time is very precious, so it becomes a striking balance between earning a decent enough surplus to enjoy yourself with today with a little for the future, and not throwing cash at fancy baubles.

You're right about the education system, it's core foundation was to turn rural types into workers for the new industrial age. Turn up at this time, lunch at 12, etc.

I think there's an answer there, but it should be led by us, rather than us waiting for the system to provide it (because the system will never be able to do that). I don't rate the chances though sadly.

by meh | 13th Oct 22, 8:22pm 1665645761

Yep, I'd agree with you there. It's a bit of a pickle especially as a parent and realising the extent of the issues our children face.

by Pa1nter | 13th Oct 22, 8:18pm 1665645496

Don't get me started on the kids.

Virtually every friend of my kids' cite loneliness and sadness as the things that effect them the most.

There's some great opportunity there though for young people coming through to craft their own livelihoods though.

by OldSkoolEconomics | 14th Oct 22, 6:58am 1665683931

I reckon the potential outcomes for the next generation are good. They have had an era of access to knowledge and sport and adventure and wealth and freedom that the world has known before. And possibly never will again.

Whether they and their parents used that wisely or just lost in devices and greed and social media and drugs will be the key differentiator in how the kids turn out.

by agnostium | 13th Oct 22, 8:12pm 1665645122

Depends where you're living for those 25 years I guess.

by spacecadet | 13th Oct 22, 6:25pm 1665638724

Gamblers fallacy

by meh | 13th Oct 22, 8:14pm 1665645252

Why the need to have something to 'show'? Did they tell you they'd have been far, far, far better off or is that just your biased opinion?

by FCM | 14th Oct 22, 6:35am 1665682503

Yvil, my parents were nearly the same, but did'nt buy first house until there late 40's, then divorce, not enough of it paid off for either to get into another house of there own, and now in there 70's and its just struggle street. Long term view always needs to be the case with your own house, the family house, get it paid off before 55, then you have options for later in life. I paid 9.5% mortgage rate over my mortgage lifetime, seen houses sell for 15% under GV, and I have also had mortgage for 2.65% and houses sell for well over GV, but I'm still well on the right side of the ledger.

by Yvil | 13th Oct 22, 4:18pm 1665631114

NZ Bankers' Association figures show that as of June only a little over 1% of those with a mortgage were behind with their payments

We're in mid October folks, how slow can we be at collecting and publishing data? It's pathetically out of date get the data released the month after. Same with GDP and CPI.

by David Chaston | 13th Oct 22, 4:44pm 1665632659

This is a good point. Much key top line data is slow to be released in New Zealand. But some is released fast. The Insolvency Service has released its September bankruptcy and NAP data. That is still showing record low levels, even on a population-adjusted basis. So it is likely that the NZBA June data when it is updated to September won't show much difference. Credit stress is remarkably low, and will probably stay that way while our jobless rate stays under 4%.

by chebbo | 13th Oct 22, 4:49pm 1665632986

Credit stress is remarkably low, and will probably stay that way while our jobless rate stays under 4%

Indeed. We'll have a problem if it doesn't, though.

by J.C. | 13th Oct 22, 4:20pm 1665631218

Aussie wage growth subdued at 2.5-3% pa (courtesy of Macquarie via the wonderful Chris Joye). That kind of wage growth is not much difference from the post-GFC to pre-Covid period.

https://twitter.com/cjoye/status/1580387241725427712/photo/3

by Foxglove. | 13th Oct 22, 4:37pm 1665632260

Under the caption “Resilient” it evidences that a healthy percentage of NZ’rs are managing their mortgages quite ably. On the other hand, in recent times at least, previous governments have all decried the poor savings record of NZ’rs in general, with RBNZ executive echoing the same message. Does that in turn mean the latter characteristic is no longer considered, by the current powers that be, to be of significance. Hence the fast on the draw decision to reduce the OCR to zilch plus a little, with the purpose to spur NZ’rs to borrow to spend to “save” the economy. Oh & whilst at it, strap house prices to a rocket. Is that then the simple outcome? Yep you are greatly more in debt, but if you have a house, that should cover it well enough? Just wondering and/or kidding.

by Carinaz | 13th Oct 22, 5:58pm 1665637088

Now banks expects 24% fall in house prices - Think earlier prediction was 12% to 14% ( Not sure)

https://i.stuff.co.nz/life-style/homed/real-estate/300710958/asb-econom…

by J.C. | 13th Oct 22, 6:22pm 1665638562

Media releases of bank forecasts are little more than propaganda. They never lay out their forecasting methodology so it's really of little use, except for a directional tea leaf read.

by waymad | 13th Oct 22, 6:36pm 1665639407

I weep for the chickens, sacrificed for their entrails used by the banks' haruspices.

by OldSkoolEconomics | 14th Oct 22, 7:04am 1665684288

I would love to be a fly on the wall at the economists 'forecasting' meetings.

The whole thing is so complex at the moment they have very little chance of accuracy.

i suspect it comes down to saying stuff that sounds about right given the current situ.

If next week putin does a deql with ukraine, xi leaves or Truss has another blonde moment its all change again.

by Squishy | 13th Oct 22, 7:26pm 1665642374

Food price rises stayed at a 13-year high in September at 8.3% with soaring fruit and vegetable prices a key contributor to an overall food price inflation figure that's come in much higher than economists expected. Food prices make up 19% of the CPI data so today's update is likely to keep next week's CPI data release also higher than expected.

The only thing that might prove more permanent than inflation is team transitory telling us that this is just a phase.