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
Heartland Bank raised 12 and 18 month fixed mortgage rates today.
TERM DEPOSIT RATE CHANGES
BNZ raised term deposit rates. More details here. Investment grade finco Liberty Financial has also raised rates.
DATA RISK
TSB is warning customers that one of their third party credit card contractors has had a data breach, one that might affect their customers.
RATINGS AFFIRMED
Moody's Investors Service has affirmed their A1 long-term issuer ratings for ANZ New Zealand, ASB, Bank of New Zealand, and Westpac New Zealand, "based on the banks' strong asset quality, robust capitalisation and profitability". They noted that they could upgrade these banks if "tangible common equity/risk-weighted assets ratio, rises to and sustains above 14%". They also said they could down grade them "if their asset quality deteriorates significantly, with problem loans/gross loans rising above 2%".
SLOWING FURTHER
According to the Markit PMI for in December, Australian private sector activity slowed amid higher interest rates. The service sector is still contracting and the wind has gone right out of the expanding factory sector, and the expansion has disappeared now.
FIJI'S PROSPECTS
ANZ has been assessing Fiji's economic prospects. It says if the island country can rely less on tourism, its future is brighter, although a returning tourism sector could give it an easy, early boost.
SWAP RATES HOLD HIGHER
Wholesale swap rates were likely marginally higher today but building on yesterdays sharp jump. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 4.55%. The Australian 10 year bond yield is now at 3.44% and up +1 bp from this time yesterday. The China 10 year bond rate is at 2.93% and up +2 bps. The NZ Government 10 year bond rate is now at 4.32%, and up +1 bp and still well above the earlier RBNZ fix for the NZGB 10 year which was up +8 bps to 4.28% with clearly more catching up to do. The UST 10 year is now at 3.46% and down -4 bps
EQUITIES NEGATIVE AGAIN
Wall Street was roiled again by the US Fed's hawkish position again, made more unsettling because the ECB joined in, and the S&P500 ended down -2.5% in its Thursday trade. Tokyo has opened down -1.5%. Hong Kong has opened down -1.0% in early trade. Shanghai is down -0.3%. The ASX200 is down -0.4% in Friday afternoon trade and heading for a -0.5% weekly drop. The NZX50 is down -0.4%, on track for a -0.4% weekly fall.
GOLD DOWN
In early Asian trade, gold is just under US$1778/oz and down -US$22 from this time yesterday.
NZD RETREATS
The Kiwi dollar is down more than -1c from this time yesterday, now back to 63.5 USc as risk aversion and safe haven moods affect currency markets. Against the AUD we are firmer at 94.7 AUc as those forces hit them harder. Against the euro we are also almost -1c lower at 59.7 euro cents. That all means our TWI-5 is now down -60 bps to 71.9.
BITCOIN LOWER
The bitcoin prices is lower at US$17,402 a fall of -2.2% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.
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56 Comments
IMF have released a paper - Housing Market Stability and Affordability in Asia- Pacific
Page 17 is great Housing Price-to-Income and Price-to-Rent Ratios Have Increased Significantly
New Zealand is Winning! (Well technically we are 2nd in the Price to Income, Sri Lanka takes that out...... we are up here in great company, in Price to Rents we are up on our Foils and have a clear lap on the other boats.... go NZ)
TLDR; This may sting a bit on the way back down.
IMF paper download it here https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2022/12/13/Housing-Market-Stability-and-Affordability-in-Asia-Pacific-513882
David - this is worth a write up? there are some good charts in the report its 50 odd pages long.
That makes for pretty awful reading. I wonder if this is slid under our politicians eye balls? Unfortunately this is where you end up with a political system that refuses to regulate. It’s just a big mess and it’s coming unstuck quickly because there is nothing tangible underpinning it.
It is certainly true that if the Bank had begun to raise the OCR a little earlier in 2021, it would not have made that much difference to inflation (core or headline) now. 25 basis points in each of May and July 2021 might together have lowered headline inflation by September 2022 by half a percent at most. But in this framing – also in their recent Review – there are two elements that are little better than dishonest. Purely with the benefit of hindsight (their own criterion) it is now clear that monetary policy should not have been eased at all in 2020, and that monetary policy should have been run much tighter over the period since then. Had that been done, core inflation would have stayed inside the target range. Now that might be an impossible standard, but that is simply to point out what I noted in my post on the Review was the major weakness: there was just no sign the Bank or MPC had devoted any serious thought or research to trying to understand what they (and everyone else) missed in 2020 and 2021. But they were responsible.
And then there is the continual effort to blame food and energy price shocks, in a way that simply flies in the face of the data. Headline inflation is the year to September was 7.2 per cent. Excluding food and energy, it was 6.2 per cent. 6.2 per cent is a long long way above the top of the Bank’s target rage – more than 4 percentage points above the target midpoint the Minister of Finace requires them to focus on.
And as I pointed out in a post debunking the “war is to blame” claim, core inflation was very high, the labour market well overheated, before the war. Link
Any semi intelligent person in NZ would know this that our housing market is just not right and IMF just rubber stamped it.
But who cares, kiwis don't have any other hobby in NZ but to keep selling and buying houses.
They just want to move to a new house down the street and add a few hundred thousand ohh well a million to their mortgage and fuel their ego's.
Why not build a good quality dwelling for yourself to live long enough in the first place?
What property investors in NZ don’t realise that a DTI is actually an effective tool at putting a support at the bottom end of the market. You prevent the blow out at the top and that creates stability. I’ve been asking for it for 10+ years now, but ‘investors’ know better. Where to from here? Property will not be a sound investment as it’s over speculated. This will take a generation to sort out unless we get someone savvy (and unpopular), approved to run the country
Im not sure how DTI put a support at the bottom end of the mkt ? How does it prevent a blowout at the top.?
DTI simply excludes a particular class of people from the mkt.. ( my view)
The RBNZs' violent use of interest rates contributes far.. far more to "instability" than any prudent Bank lending has done.
Its' Central Banks interference that, paradoxically, amplifies cycles rather than smoothing them.
A thrifty family on a lower income might well be a far better credit risk than a higher income household who are "big spenders".
DTI seems like just another heavy handed " Centralized Governance" approach that promises to solve a problem..... but doesn't really..
Roelof… here we go. When you cap the amount people can borrow/speculate, what happens in first world countries is that ‘leverage’ becomes a problem from a banking perspective. First home buyers are subject to the same DTI and compete in the entry level and support these prices. So you have parameters supporting the top… and parameters feeding the bottom. It’s people like you that I worry about, a complete lack of comprehension on how a society SHOULD function
You are making assumptions here, in arguing that DTI somehow stabilizes prices.
Like I said... the main unintended consequence is that it arbitrarily excludes a class of people from the mkt.
If there is an imbalance between supply/demand, together with high immigration and lower interest rates prices will go up quickly.
If there is a deep recession with high levels of unemployment prices will go down quickly. ( FHBs' are unlikely to step in and support prices in that environment ....and Banks will be fearful lenders etc )
DTI will not have the level of mitigating influence u think it does.
It is not even DTI that causes instability... It is the ability to service debt that is far more important. ( And that is a function of interest rates + incomes ).
(Job security is a part of this too.)
(see second graph) https://www.rbnz.govt.nz/statistics/key-statistics/household-debt
Not sure how my comments indicate a lack of comprehension of how a society should function...
I recall my father borrowed 100% finance to buy his farm , back in the day. He worked really hard, we lived poor , which was ok, and he managed to pay off the loan over time.... and it was a struggle with droughts, poor quality soils etc ..
In your world he would have been excluded from that opportunity.
I like your example and thanks for sharing. It’s anecdotal though and not really applicable to the conversation. What do you suggest then? Would you say the current market is effective? It’s probably the worst property market in the world when it comes to greed and speculation (maybe second to china)
Tom... Yes... Our property mkt is a mess.
My comments , in response to yours, were only about the DTI.....
In the questions/points u have just raised.... I pretty much agree completely..
In terms of good ideas ....I have always liked what Dale smith has to say. ( he comments here). He says it starts with the cost of land.
( which has less to do with speculation and more to do with supply ).
DTI's = less debt = greater ability to service the debt.
If DTI's existed in your father's "spendthrift don't save a penny" days, then wouldn't that apply universally? Or are you saying that cashed up nzers would be hopping around the regions buying up all the farms, without any competition from sub-prime borrowers?
nzdan...
What Im trying to say is that DTI is a blunt heavy tool that will exclude a class of people, as determined by income.
Completely excluded, without any intelligent discretion on the part of the lender.
DTIs might = less debt. ... or might not
AND DTIs' dont necessarily = greater ability to service debt. ( state of the economy + interest rates play a big part ).
Many ways to "game" things.. eg Institutions/investors can raise debt in the Capital mkts...by passing DTI. ( whereas an ordinary home buyer cant )
( Think of Blackrock , post GFC in USA. They bought many single family homes.... all with very cheap debt )
Rather than a lack of DTI, I'd say the biggest reason for our housing dilemma has been Govt + RBNZ mismanagement, over the years
( Basically we use Immigration + Credit Growth to drive GDP growth... AND.... maybe also NZ is a low wage economy relatively )
In regards to hopping around buying up farms.... I pretty much agreed with the views of my Dad. He believed in the idea of small family farms rather than the amalgamation of family farms into industrial farmimg...so to speak.
In observing things over 40 or so yrs... I've become cynical when people use the ideas of "efficiencies" and "productivity" as reasons to amalgamate and centralize...etc
New Zealand is Winning! (Well technically we are 2nd in the Price to Income, Sri Lanka takes that out...... we are up here in great company, in Price to Rents we are up on our Foils and have a clear lap on the other boats.... go NZ)
Love the sailing metaphor. Makes it more platable than simply being a 'dumb bubble.'
Anyway, really interesting report with all kinds of interesting insights. Cheers.
Get your head around Fig 10 showing "Price Misalignment as Primary Factor Increasing Downside Risk".
Kiwis puch above their weight again.
Quote: "In 2022, housing prices may be as much as 70 and 50 percent above what a median household can afford in New Zealand and Australia, respectively and the average household would need to spend more than 40 percent of its disposable income to afford housing priced at the median."
The IMF report does not even define what it means by "affordability"..?
Is it defined as the "smallest space that the average person can afford"..?
Why do people buy into this arbitrary price/income metric.? ( some commentators here think it should be 3 or 4 )
Auckland population of 670000 in 1972 vs 1.6 million today has had a vast impact on land prices....... far more so than av. incomes.
The size of the av house in NZ is 2100 sq feet vs 900 sq ft in Sweden .. Do u think that has an impact on comparative affordability measures ? Rent measures?
And then there is the question of constructions costs... https://www.archdaily.com/421672/hong-kong-tops-charts-as-world-s-most-…
As we open the immigration floodgates again.... are we simply going to repeat things?? eg.. end up with another mismatch between supply and demand...over time. ( In housing , services, infrastructure ..etc ..etc.. )
So easy to say the cause of all this is the so called "NZ housing ponzi scheme".
I'd say ... the reality is far more pragmatic than that. In regards to the meeting of housing needs ,, NZ has done a very poor job of it over the last 50 yrs...
AND... the current solutions seem , somewhat, ad hoc to me.
eg.. a good question might be.. Should open up immigration again solely on the need for workers or should we also be more mindful of "capacity" constraints.. and deal with those first. eg. hospital beds, classrooms, housing ,etc etc.
In what sense is it real world.?
My generation look back on the quarter acre section with free standing house.... as the "standard"
People in Hongkong, of my generation, might look back on a 50sq mtr box and consider that the standard.
Between those extremes how on earth does price to income define or reveal much at all.??
Throw in interest rates and price/income ...on its own.... is kinda meaningless.
40 yrs ago I could buy a house on a 1000 sq mtrs for 4x my income .. Somehow this broad metric , in itself, defines affordable ??? yeah right.
Between those extremes how on earth does price to income define or reveal much at all.??
Because it gives an indication of how much time and labour is exerted. It's a broad measure and directional in nature. And yes a 1/4-acre section with house doesn't apply to HK.
Anywhere people want to travel to be near the sea.
Which are places that look how they do, because they're not as conducive to industry that works elsewhere (i.e. they are far from larger common markets).
It's like saying your life would be better if you just went and got a better job. If you could, then surely you would have already.
Highest net migration of NZers to OZ since 2014
https://www.abs.gov.au/statistics/people/population/overseas-migration/…
Hello Te Kooti,
Please stop projecting your racial ideologies and calling people names that don't agree with your extremist views.
Is it time to enquire again exactly as why you are still proudly posting on these boards named after somebody that murdered ~70 innocent New Zealanders?
It's disgusting. Imagine if somebody was posting here under <the name that Jacinda will never say>.
I am one of the "cuzzies" as you so eloquently put it, so I suppose you are accidently right there.
It does indeed. It's very sad that there are so many low IQ types that hate it and insist on "decolonization". Nasty people.
The universal pension won't exist by the time I'm that old. You can count on that.
How long ago was it that a visitor, leading a trade delegate from the Netherlands, misunderstood, smiled and moved and got head butted, broken nose, for his audacity. Just a bit overcharged, afraid to say, no assault, that’s what it’s like selectively, excusably for some of us.
Well Brock over fifty years ago I listened often to the Wizard in Christchurch’s Cathedral Square sally forth exactly that same sort of argument. Regrettably I am undoubtedly a vile colonialist because I enjoyed the great humour, sardonic & cynical, and style and amongst all of it was a good vein of basic commonsense. Today though, that Wizard would be vilified and condemned as both a racist and perpetrator of hate speech.Only my opinion, but I submit that I much preferred let’s say, the then less modern society to the PC claptrap spouted by all and sundry these days. We were free then to make up our own minds as to what was acceptable rather than being told what we must think. Yes, yes that’s done it, now I’m a target, let fly all you do gooders out there.
What makes these letters such a point of national controversy is that they contain information which will undoubtedly shed light upon the active role of the Queen herself in carrying out an act which essentially amounted to a modern coup d’état of November 11, 1975. During this sad period, Kerr made history by not only sacking the elected Prime Minister Gough Whitlam, but also revealed the scope and nature of the British Monarchy’s very real powers in our modern age. Link
Can’t change that history anymore than that of for example the Babylonians, Persians, Macedonians, Romans, Huns, Visigoths, Mongols, Spanish, Dutch and Bonaparte if you like. Conquest, like it or lump it, right or wrong has been a fact of human behaviour, tribal and continental, and in that regard is it forgotten that the Maori themselves had to vanquish similarly the indigenous people that were found here before they sailed here. New Zealand is new but the British nation that arrived here had evolved in recent history, from Celts, Britons, Saxons and Normans all by the way of conquest. Adolf had a go at adding another layer but failed. Time marches on with all of that in its stride, regardless.
Good news for the big 4 with Moodys latest ratings, good for NZ. Re TSB data breach, this is one of the difficulties now for small banks, the cost/scale to invest in systems and compliance. Time for some of the minnows to merge I feel, starting with TSB and Kiwibank, a good fit you would think.
If our banks where listed directly and only on the NZ stock exchange , anyone, anywhere could own the shares? And they would and our kiwi savers would only own a % as they want diversification, so they own them on the ASX......
I do not get this BS about the profits leaving, nothing, in any country is only owned by the people of that country anymore unless its nationalised.
What ownership structure do you suggest?
Decentralised NZ owned community banks.
The times of amazing growth that countries like Germany, Japan and China have had can be put down too many, many local banks lending for business not for assets or consumables. Being local they know the local SME businesses well. Here is a very interesting talk on the importance of having many small community banks. TSB is a good example. It is purposely linked to the charitable Toi Foundation that puts millions of dollars back into the Taranaki community.
Bit of the ol' Aussie DGM. House price falls in Aussie are not slowing. In recent months, Aussie house prices have been falling at a consistent annual rate of over 13%. Shouts out to the mighty Chris Joye,
https://www.livewiremarkets.com/wires/house-price-falls-are-not-slowing
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