Here's our summary of key economic events overnight that affect New Zealand, with news high and rising inflation in Australia is leaving their central bank with some ugly choices.
But first, US mortgage applications rose last week from the prior week, a third week of improvement, while mortgage interest rates remained largely unchanged. But year-on-year the variations still remain very negative.
The Canadian central bank raised the target for its overnight rate by +25 bps to 4.50% as expected, and signaled the end of its current aggressive tightening phase. But it is continuing its sell-down of bonds.
China might be on holiday this week, but their weather is becoming a story there. Temperatures have dived - and that has caught out their energy system to supply enough heating in some key regions and cities. Local governments starved for cash after enormous spending on their “zero Covid” measures cannot afford to keep up adequate supplies of natural gas. And they are in no position to bring in subsidies which have been a strategy in the past to make heating and cooking affordable in winter. As the pandemic spreads illness, the cold is adding to the misery of millions. These are problems China doesn't need right now.
Singapore said its consumer inflation rate rose by 6.5% in December 2022, which was less than the 6.7% it recorded in November. And the annualised rate from November to December rose at just a +2.5% rate.
Yet another sentiment indicator from Germany reports recovering conditions, this one for business sentiment from Ifo. Bolstering these surveys, the German Government said its economy will not fall into recession in 2023, which given what is going on, on its borders, is an impressive achievement.
EU corporate earnings are surprising some with their staying power, and also dispelling fears a recession is imminent there.
In Australia, their CPI rose +7.8% in the year to December. That was above market expectations and its highest since 1990. The most significant price rises were domestic travel (+13.3%), electricity (+8.6%), international travel (+7.6%). Food prices rose +9.2% there. The RBA next reviews its cash rate target on Tuesday, February 7, 2023. It is more likely to be a substantial rise now to be followed by more big ones - and that in turn may affect the RBNZ thinking for its February 23, 2023 MPS review.
The RBA seems to be at an inflection point, with tough choices. Either go hard and risk recession or hold off and risk a wage-price spiral.
And staying in Australia, their new home market is retreating faster. Sales of new homes fell by -4.6% in December leaving sales in the final quarter of 2022 a remarkable -42% lower than at the same time in 2021. Anecdotal data in New Zealand suggests a similar pattern is developing here in 2023.
The UST 10yr yield starts today at 3.46%, and little-changed from this time yesterday. The UST 2-10 rate curve is less inverted at -67 bps. But their 1-5 curve is little-changed at -110 bps. Their 30 day-10yr curve is a tad less inverted at -108 bps. The Australian ten year bond is up +9 bps at 3.50%. The China Govt ten year bond is unchanged of course at 2.96%. And the New Zealand Govt ten year is starting today at 4.13% and little-changed.
Wall Street has started its Wednesday session lower with the S&P500 down -0.6% in late trade. Overnight, European markets were all about -0.14% soft. Yesterday, Tokyo ended up another +0.4% in its Wednesday trade. Of course both Hong Kong and Shanghai are closed for holidays but Hong Kong will be back today. The ASX200 ended down -0.3% but the NZX50 rose +0.5% yesterday.
The price of gold will open today at US$1936/oz and up another +US$5 from this time yesterday.
And oil prices start today up +US$1, at just under US$81/bbl in the US while the international Brent price is little-changed at US$86.50/bbl.
The Kiwi dollar has fallen by -½c from this time yesterday, now at 64.6 USc. Against the Australian dollar we start today down a full -1c at 91.3 AUc. Against the euro we are down -½c at 59.3 euro cents. That all means our TWI-5 starts today at 71.2, and down -70 bps from yesterday.
The bitcoin price is a little lower again, now at US$22,622 and down -1.0% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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148 Comments
The lucky country, not so much.... better off here.
Interest rates still low and house prices not as high. The price to income ratio is a lot better there. So i beg to differ.
Apart from just housing, they have better standards of living, public transportation, education, resources. Less of whining and procrastination.
But yes there are snakes and hence i won't leave NZ😁
It's also full of Australians :,-)
Yes it is and if you had been crawling through the desert towards Alamein or through the jungle in the Solomons you could not have needed any other nation’s soldier beside you.
Unless you have lived all over Australia and for a decent period of you life you shouldn't make comparisons. As a Kiwi living in Oz for 35+ years I can tell you its never been significantly better than NZ and that economically and politically Oz has been on a dramatic downward spiral this past decade. I don't see that changing no matter which of the two main parties run the show as it now has the same uni-party system(also run by the US) taking us down the gurgler fast.
I'm planning the permanent return of my family to NZ now, and though I agree with the lack of wild predators, there are more and more of the same predators of a different sort slowly filling the NZ elite and planning the same ending there too if they have their way.
The grass is not always greener, and even when it might appear so, droughts(of many sorts) can change that in an instant.
Oh and I definitely beg to differ on the education standards, public transport etc...I have kids in the education system in Oz both public and private, and live in the suburbs of Melbourne. I can say you have to pay though the nose to get close to 'good' public transport and infrastructure, and refuse to pay the ever expanding public 'voluntary contributions' or private school fees or you'll be paying for the schools to build 'for profit' businesses on site with your child's education money. It's smoke, mirrors and greedy scams all around you here now.
Economically Aussie will always be better off than NZ .......as they have all that stuff in the ground, miles from anyone.
NZ either hasn't got enough or won't mine it for ecological reasons.
So take your pick ! ...pardon the pun.
NZ, we love to leave money on the table. The home of the principled poverty class.
Leave money on the table, or maybe an environment that your kids might engage with.
Tough choice.
Why dig our stuff up - it's only going to get scarcer - using everyone elses cheap stuff first isn't a bad strategy.
Exactly Americas plan.
$450 a week for 4 bedroom, backyard, modern house, 35m from Melbourne CBD. Trust me, Aus is still far ahead in the eyes of younger kiwi gens.
Couldn't even get a 2 bedroom 20 year old place for $450 in Takanini
For young Kiwis particularly, Australia has a lot more to offer in career options and opportunities, resulting from the scale and complexity of economic activities across the ditch.
With remote working why leave NZ, unless you have to do manual labour for a living.
Very interesting comparison, thanks.
Mr and Ms GV 27 have had a conditional offer accepted on a family home close to one set of parents, contingent on selling our current place, which I'm confident we can do for a sensible number that makes everything work out.
Starter home was a sensible cheap buy at the time but the depressing thing is those who took on much more debt (banks would have lent us $1m+ at the time!) have ended up with far greater gains. It does make you feel like a sucker for doing the right thing.
If we want to grow our family we have to get a bit more space and something closer to schools and you have to do the right thing for your family, even if you know it's probably not the best time. There'll be lots of people my age facing similar choices. Some will make the move and dig in, while some will decide they can't make a bigger family work and won't go down that road, and that's a really shitty position to find yourself in, especially in a household with two working parents. I don't think older Kiwis get how demoralising that is, and how much of a factor it is in people choosing to leave NZ.
Ok Boomer - my attempt at pointing out the GV did not specifically blame anyone for anything seems to have alluded you as well?
Baywatch, "Sit down Boomer" "OK Boomer". Why don't you use some intellect to write a constructive post, instead of regurgitating old clichés.
Once the Boomers stop commenting that it was "harder" in their day then I will stop, only then!
Never seen a comment from a Boomer which said it was harder in our day. All the comments I have seen have been responding to newer generations saying we don't understand or that it is harder now because of what we did.
I think the lack of perspective is in the recent generations. But also a lack of analysis on what to do about it, so they just point the finger at Boomers. A lazy response at best, and not a solution.
In our younger days a house was seen simply as a place to live : somewhere to raise a family ... credit was expensive & hard to obtain ... but supply of houses easily met demand ...
... since then the mindset has changed completely to commoditise houses as an investment , to pick & flick , to gear up with endless cheap credit , and we've severely constricted supply ...
However you cut it , the old days were infinitely better for a happy healthy more egalitarian society ...
Different pysche wasn’t it. Everyone called it a home not a house. One exception being on a farm it was a farm house, not a farm home and that is because it was part of a business and that in its own way identifies someway, as to how the perception of housing has evolved as the attraction of making a business out of it has grown and grown again and again.
Nope it was a homestead not a farm house
Might have been worthy of a homestead perhaps if you were a wool baron family. My great grandfather built what was known in our family as the farmhouse in 1877 but to describe it as a homestead in that colloquial sense, would be a delusion of grandeur to say the least. He and my great grandmother nevertheless raised 11 children in its two storied ordinary cube shaped structure , of tiny rooms, The farm was sold in 1957. The purchasers then, still own it today and the farmhouse still stands and is still inhabited. They call it their farmhouse too. Be that as it may, refer to Collins definition as
- homestead n farmhouse plus the adjoining land.
Hey Mr F : if you're needing a good larf , check out Bob Jones latest ( No Punches Pulled ) " Scoutmaster Index " ... his theory is that if any PM or leader of the opposition would look comfortable attired as a scoutmaster & leading a troupe of youngsters , they'll be short lived at the top of NZ politics ... Bill English ... Little Andrew , and now , Chippy !
“alluded”…😊
Is 35 young? Finish high school, bang GFC “sorry we have had to scrap all apprenticeships”. Finally find low paid work, save hard (house prices rise quicker than anyone can save 20% of the increase), finally get deposit, buy tiny 2bed townhouse for $850k, bang inflation and interest hikes (house now $700k deposit gone). I feel for many of the young even though your right they have not really lived through recession. I guess my point is all age brackets have had their different set of major challenges.
Agreed. The "recession" we have seen has been the reduction in the opportunities for many young people, all to enrich the older generations.
- Saddle with debt to study hard because everything needs a degree these days,
- Pittance post-graduate salaries:
- less 13% to pay for said study,
- less extortionate rents to pay for someone else's retirement,
- if they're lucky, save $100k just for a deposit on the house,
My eldest bought her first house middle of last year. Better to be in a house they own even if it has gone backwards a few percent. It's not an investment but a place to live, long term they'll always be better off than renting.
Values going backwards a few percent doesn't matter. Mortgage payments doubling does though. You only come out ahead if you can afford to keep paying the mortgage
Awesome and agree but it can be an issue when looking to upsize to start a family or relocate for better work etc.
Yeah hear you Murray, there's still no disputing that's it harder now than back in your day.
You may very well think that...
"No bank would have loaned us the money on that. "
And therein lies one of the major problems today and major differences to yesteryear. The fact the banks wouldn't lend was a good thing, that kept the price low. Since that time banks have ramped up the lending and simply capitalized the low interest rates into the house price leaving a ridiculous and precarious situation.
NZ should seriously consider mandating non recourse mortgage loans as USA. If the banks have skin in the game then they will be a lot more cautious about what they lend on & who they lend to.
Avg US house price is approx half NZ.
What are "non recourse" mortgages? Not a term I'm familiar with.
Jingle mail. The bank takes your house and that's it, they can't come after you for anything else. If the house is now worth less than your mortgage, they take the loss.
I suspect if people get into serious trouble and owe money to the bank after their house has sold, they'll simply skip across to Aussie for 3 years to see out the 3 years of bankruptcy rather than try to pay it back. A much easier and faster outcome for most.
Just to add, the cost of everything vs take home pay has not risen in sync. The buying power with the dollar is decreasing faster than the buying power via average income increases.
Housing is just an easy comparison because unlike food and other essentials. it has outperformed its cost vs income over decades.
If you had taken your pay every fortnight for the last 30 years in rice, rather than USD, you'd have stronger buying power with the rice *if it did not have shelf life*.
The problem is not in generations of Kiwi's. It's in the politicians, who are too wedded to big money. Newer generations of politicians are just as bad as the older ones or perhaps worse. Older generations do tend to sympathise and empathise with the current generations but we can't change it. Who can? The politicians in the rules and regulations they put in place. But remember as well the banks and finance companies lobby those politicians and that lobbying probably also includes direct and veiled threats on potential consequences, real or just possible or imagined. To change what is happening will take vision and courage, and i don't see any politician that has those currently.
100% but at the same time, how many boomers that majority have almost all their wealth tied up in their house, would be happy to vote in change that could potentially slash their paper net worth 30-60%?
Sympathy is just words until actions back it.
Even if someone was able to rise the ranks in politics to propose these types of changes that we all would like, if personal greed wasn't involved, I just don't see many people voting it, once you're "on the ladder" why would you want that ladder to slip under water
I'd suggest and education movement through the media would be a good start. Paper value of property is nothing, meaningless until it is sold and converted to cash. i have personally known a few people, including a family member, who were gloating over the "value" of their property's. More than one took great pleasure in telling me they were millionaires. Some I challenged on it to learn the substance of their claim. None of them appreciated their little bubble of self importance being ruptured.
I think you might be surprised a bout who would vote for change if the whole market was affected. A simple fact is that everyone at every level benefits a whole lot more when property/housing is much more affordable.cheaper. My view is values need to drop by 66% minimum.
Main thing is, you got a house that suits your needs Congratulations.
Thanks! Probably not the market I wanted to be buying and selling in but life goes on and I'm not putting the important stuff on hold waiting around to see how it plays out.
NZH is headlining a not so lucky $1m+ mortgage family. Neither that situation nor yours are unique one would think. It’s times like these, and they have hardly just arrived, that New Zealanders should rightly expect the political parties seeking the next government term to be offering policy of both substance and certainty. Not so far though, as far as I can see.
Thats a lot of cash to find for the next 20 odd years... Latest Roy Morgan poll shows Labour disaster in Oct, sure chippy will get a 2-3 month bounce but this is going to be a shocker for them.
The new PM has been #3 in the machine for over five years proudly, enthusiastically, energetically promoting and driving both policy and ideology and now he is suddenly going to see the light, slam on the brakes and wrench the wheel into some sort of frantic U turn ? Hardly credible is it.
Ignorance of your party's incompetence is no defence, perhaps?
Chris Trotter explains how this year's games will be played
Some nice cherry picking of polls there. In effect National only lead by single digits. Nothing to be so confident about - and i feel this misplaced arrogance of national supporters (and their MP's) will see them lose the election.
https://en.wikipedia.org/wiki/Opinion_polling_for_the_2023_New_Zealand_…
If Hipkins closes the gap and that smaller gap stays longer - watch for the unresolved issues National has and the infighting to return to the surface as they collapse back into chaos. Remember last year the polls understated the size of Labour's vote. It turns out 1000 kiwis are not an accurate reflection on the country as you may think.
Strap in, its going to be an interesting ride.
. . retain the faith , brother ! ... but , you are dreaming ... Labour are toast , and deservedly so ..
But , unless Daveyboy Seymour has a big influence on Luscious Luxon , I think that the Gnats will be a disappointment in government ... more key years wasted with no needed structural changes ...
Yep Nicola Willis has just come out and said that minimum wage is too high, pushing inflation up, without acknowledging that it is the relative difference between things that are important.
If housing was far more affordable, then the minimum wage wouldn't be an issue. As it is, earning only the minimum wage puts you in the grey area between still being worse off than being unemployed and claiming every benefit you become eligible for, or being paid a lot more and escaping the poverty trap.
Horse and cart stuff. Do we just leave minimum wage alone because inflation is going up? Or does minimum wage go up because of inflation?
MAYBE house prices should be in included in the CPI, then Nicola can blame housing for pushing inflation up.
Interesting that both major parties now claim there's a crisis & in response have selected leaders that mean no matter what happens in the election the country will be led during this difficult time by a cis white male.
Funny that.
Suggest an even worse similarity. When each was chosen, neither party had anyone else.
There is substance and certainty for landlords and housing speculators that NZ National will make their unproductive ventures more profitable, regardless of who's leading the party.
perhaps only less loss making.
It’s all their fault.
sarc on
Going to be thousands of these situations in the next 6 months.
I imagine we will start seeing stories about new development disasters too, people who signed up a year or so back and now need to settle, but at much higher interest rates than they expected.
Williams had them on as airBNBs, but yeah there will be a lot of these for sure, the rental yields will not even pay the interest bills, devs do not have the cashflow so mortgage sales will follow, this will put people off buying new, why buy new full price when you can buy at mortgagee auction , going to start looking very USA GFC
They are blaming the government for not forcing the banks to offer 30 year loans yet they chose a 1yr when they could have chosen 5yr.
and it must have been a very lenient bank, lending a young new immigrant family a million dollars to buy in a disaster prone area like Nelson?!
Also highlights how reckless bank lending has been. Lending $1mil to a young family when they admitted to barely being able to pay much more than the interest when they had a record-low interest rate. Banks must be scared of how sour their assets might turn.
Might this explain why many banks are now bleating about the need to stop, or reduce, OCR hikes?
I reckon they are worried.
What I didn't quite get is that they came from an environment where locking in long-term is the norm, but went for a very short term fix.
I get it, it's a fair point but I think it should be refined.
The last three years have also been not the best time, for any normal NZer trying to act in the housing market. Shortages of listings and prices that feel each month to be more expensive than the last, slimy real estate agents enjoying the buzz, and media loudly reporting how amayyyyzzzing the price rises are.
The sudden turnaround is also not good and puts a lot of pressure on anyone trying to move their life along to the next stage, without jumping at the wrong time and handicapping their financial future.
Certainly price stability is the magic state that would make things easiest, small price rises nice to have too but from a level that isn't mind blowing. If we want a generational fight then take me to periods that had such stability. (maybe it was never).
I am an older kiwi GV27 and I do get how demoralizing it is.
Two things.
One. I think our house price fiasco of recent years is generating New Zealands greatest social disaster.
Two. You have done well in face of the challenge. I also think of those who after many years in the workforce remain trapped in renting living week by week with a grim future. No way out
100% on renters, especially those paying yield-driven rents on insane capital values for houses that are functionally the same as they were 20 years ago - in many cases over and above the cost of a mortgage would have been, but a mortgage they can't get because the rent meant they couldn't save a deposit.
I firmly believe a huge amount of our social cohesion issues come from the fact we've made the basics like keeping a stable roof over your head so hard and getting ahead borderline impossible for a huge chunk of our population. If it feels like you can never great ahead, then why keep playing by the rules and keep trying? Not an aspirational environment for kids to grow up in, even if they do have hard-working parents they never see who can only get just enough to keep their heads above water. No one wins in this scenario, why we accept it as the new normal I have no idea.
GV you are correct that no one wins. Do we accept it as the new normal? I don't think so. No one I know thinks it is acceptable. But ask yourself who can change it and what it will take.
We have discussed this a number of time before and i have suggested where the problem lies. Ask your local MP what they intend to do about it, and if they say there is nothing they can do as a Government, call them on it and ask them why they deserve another term in government.
Murray. Some here commenting on interest.co do accept it. They want their interest deductions back and capital gains to return.
Perhaps it is the wording? We are forced to accept it, but that doesn't mean we cannot call for change to something more equitable. I don't think we should accept it as being "normal" unless we are also prepared to accept the subjugation and oppression of ordinary people. I for one don't accept that at all.
Speaking for myself, I accepted the new normal years ago. I'm in my 60s now, still renting, both of us working full time and our kids approaching teens and still sharing a room. I realised I'd taken a few too many hits to compete and, given the govt/banks actions to inflate prices as I tried to recover, I gave up on owning. We are still working hard and living a pretty austere life. It's paying off now of course - renting is way cheaper for us.
Anyway, I have no choice. I can't see a future for our kids in NZ so expect they will leave in due course. The Ponzi is a black hole that will swallow all capital and debt we can throw at it over the next few years until something big breaks, and there is nothing I can do about it except work, live cheaply and grow vegies.
"I didn't specifically blame anyone for anything"
Yes you did GV27
"the depressing thing is those who took on much more debt have ended up with far greater gains. It does make you feel like a sucker for doing the right thing."
A couple of comments:
1) you made a gain on the house you bought, so be happy about it, it doesn't matter that others made more money than you, some others who rented, made less, focus on yourself, rather than others.
2) you may want to review that what you consider to be the "right thing", maybe, even though you tried, your did not do what you call the right thing after all?
1) Buying and selling in the same market, so the gain is irrelevant. The property I am buying has increased by the same amount in the time since I bought my home. It just means someone else has to come in at the bottom and assume that level of debt is normal. That system clearly has its limits.
2) There's no blame in your quote. If you're implying I should have taken on far more debt to have the bigger, flashier home as a starter home, when I was earlier in my career and on a lower salary... well, I'm not going to explain why making a responsible financial decision at the time was 'the right thing' for me.
Would it make more sense to move the parents closer to you ?
Hope that sensible sale price on your house works out
In Australia it is far more common to float loans, right?
Oof.
AUD is surging on the fact the the RBA is now well behind the curve..... not good for the RBNZ and the NZD. Higher inflation is going to stick around for a long time as the wage price spiral accelerates.
You could well be right.
If so, and I am wrong on inflation moderating significantly by middle of the year, then things are going to get really ugly. Unemployment well above 5% by year’s end.
so I hope I am right ….
be good for NZ export businesses if cross rate retreats back into the 80's
not so good for the Aussie bank dividends
What do we export to Australia, other than people?
Money
Indeed, my wife in the public service looks like she will get a 22% salary raise this year, without going up bands.
Factoids
Boomers worked their asses off to get to the stage where ...
They are keeping the economy booming.
They are creating most of the employment.
They are leaving the Gen u,v,w,x,y,z's huge inheritances to blow!
Meanwhile the "drain on society" gen u,v,w,x,y,z are wasting thier opportunity on phones, parties, drugs, cars, junk . ...
I think you are missing the point that they are making house prices unaffordable by buying investment properties, greedily outbidding first time buyers at auction despite being loaded themselves. And now Labour have stopped that rort by taking away the tax perks they are going to vote them out.
"I worked hard all my life" said the 65 year old as he was whisked away by the Police for mugging a 6 year old girl of her pocket money.
"They are creating most of the employment"
Seriously, the youngest boomers were born in early '65 - circa 7 years max to the golden wrist-watch. I mean come on dude.
Zen20 in many ways they are still creating employment - business owners are getting older as are farmers -and getting out is harder as younger kiwi's dont have the resources - often because of large mortgages or look at the business owner lifestyle and say its not for me
I am a business owner (and supporter of small govt) and while I enjoy owning and growing a business there has been plenty of 80 hour weeks involved and associated family sacrifices - not a complaint just a recognition that for many younger kiwi's choices are differerent
I would like to see our egalitarian society return and my solution would be for Govt's to make a determined effort to make it easier to build a house (planning rules etc etc) and also for the state to build more. If a state build process was well structured it could even be a "company" that long term investors support - low but regular dividends, state "guarantee" of some sort. People smarter than me could structure these properly for us all to benefit including private landlords withy lower buyin costs and lower rents (they are not the enemy but economic mismanagement is)
I hope that’s a meta-troll comment - I feel like the STUFF reader base has immigrated to this site this morning
factoid
/ˈfaktɔɪd/
noun
an item of unreliable information that is reported and repeated so often that it becomes accepted as fact.
estimates released by Statistics NZ show the brain drain is turning into brain gain, with 5700 more people arriving in the country than leaving in the year to November 2022
MSM once again selling the false narrative that net population gain is the same as brain gain.
One expects more brains from Brad Olsen than simply counting the net number of brains arriving in NZ minus those departing as a sign of policy success. He is an economist after all - knows how to spin headline stats in a way that fits his narrative.
I've got 50% of my mortgage with Westpac coming up for renewal in March. Has anyone negotiated with the banks recently and how much of a discount would you expect to get on the advertised rate?
I'm looking at 300k which I'm considering re-fixing for 2 years.
Might depend on your current LVR.
If the Value has fallen, then the lender might want a current update, and apply that to your roll-over. If it was the other way around, I'm sure you'd ask for it to be taken into consideration.
The harder question is the term. Personally I would only fix for 1 year as I reckon the economy will tank and the RBNZ will drop interest rates significantly. However there is also the possibility that the economy stays strong or of stagflation.
Turned more bearish on the economy Jimbo? A few weeks ago you were saying it might be ok.
I change my mind daily, although I only flagged that as a possibility. I think I was feeling all happy after my holiday.
The latest CPI was a concern but it’s more the credit card spending being down that is the big indicator
Just out of curiosity, why would the economy crash? The mortgage population is just 30% and that too heavily mortgaged are in 10-15% range.
Most of the NZ population is in the age group who have already made money and are comfortable and now they are spending up and enjoying life. They will keep on doing it and I don't see a reduction in demand.
On top of it, we have young who do not care and will still earn less and spend more until they come into the adults category. So yeah i do not see any drastic changes in RBNZ policy in next 3-4 years.
Happy to be corrected though.
It will crash because residential property construction and all its associated sectors is crashing. And that will have significant flow on effects.
Also inflation is meaning that many people will be tightening their belts and spending less in the economy.
I think those are the two main reasons.
Misleading statistic. 30 pc have a mortgage on their family home. That is half of all home owners. And many have commercial mortgages not to mention rentals, beach houses etc
Our enormous, in absolute numbers, current account deficit will cause a hard time for NZ. And...it is growing by the week due to continuous government deficit spending, decreasing volumes of our export products and we have to import all transport fuels which jhave all increased in price since the start of this year. (See the trend of Gasoline RBOB at the Nymex!)
I concur. We don't have many productive enterprises here, which means NZ can't maintain its first-world tag without its consumers drowning in debt.
Lucky you. 300k is just loose change compared to those first home buyers taking on 1mn+ mortgages.
What were they really thinking? Don't tell me they really wanted the house, family additions, good school area, bla bla. They are all excuses for not thinking everything through properly and getting into FOMO and most striking of all is the greed of the species.
No point going to media now and crying. Should have asked in media for suggestions before pursuing those millon + mortgages.
I guess they could afford the repayments which were probably about the same as rent and they were told by everyone (including the RBNZ) that interest rates were never going back up.
The choice of borrowing a million dollars for a lousy New Zealand shack was basically an IQ test.
There's a lot of very stupid people out there.
The agents and vendors away laughing with the loot and the banks are now squeezing their balls in a vice.
The wife has balls?
It's 2023. We're "progressive" now.
they has balls
Yes, this. Hard but fair.
Anyone who can front run a million dollars is not an idiot. Maybe you might consider them pretty smart and they have a decent high paying job because unless they won Lotto they will not be idiots. The level of envy on this site is palpable at times.
Who is talking about front running? Do you even know what those words mean?
These people borrowed stupid amounts of money for a lousy shack and will now lose it.
Rocks in their head.
Nothing to envy.
No Brock. They got on with life, found a place on the ladder and built a secure and positive future for their families and....hahaha just kidding they were idiots.
I agree up to a point.
But you have a whole society and media hyping up property every minute of the day, with a constant mantra of ‘you can’t lose with property.’
That gets inside people’s heads.
very very few people were talking up the huge downside risks, and many of those who were, were us DGM (lol) commenters on this non- MSM website.
Not even the commentators here were predicting these kinds of interest rates. Most believed we were turning Japanese. Even the Japanese are no longer Japanese.
'Do you really think so?'
No point going to media now and crying. Should have asked in media for suggestions before pursuing those millon + mortgages.
Lol the media were the ones pumping up the market with constant FOMO stirring articles sponsored from RE industry... if they had asked the media they would of been to told to borrow to the hilt.
I couldn’t get them to come down but they already had the cheapest rate among the big four and they increased the rates the following week so I took that as a win.
I fixed for one year at 6.49 although seriously considered 6 months. They wouldn’t drop, but the mortgage was reset to 30 years which reduced the payments.
"the mortgage was reset to 30 years which reduced the payments" - yikes, is that the bank's solution to this? The RBNZ puts up rates to take money (and demand) out of people's pockets but the banks just give you the money back again in return for a few more years of debt.
Yep. It’s a temporary solution to get us through this year.
Hi D-Back, good on you for not fixing for longer than 2 years, don't be tempted by the cheaper long term rates.
Meanwhile in the Lucky Country
Typical borrowers facing this year’s fixed-rate mortgage cliff will have to pay about $2700 more a month if they do nothing and are rolled on to their lender’s standard variable rate, says RateCity which monitors home loans.
But by refinancing to one of the lowest variable rates, they could reduce the increase to just $1600 a month – saving just under 40 per cent.
First home buyers and those who bought with large mortgages face the biggest potential hit from rising interest rates. Getty Images
This is based on an owner-occupier repaying a $1 million principal and interest fixed loan. The example assumes the Reserve Bank of Australia will increase the base rate from 3.1 per cent to 3.85 per cent by May in line with Westpac and ANZ forecasts.
The figures assume the borrower will be coming off a two-year, 1.92 per cent fixed rate on to a revert rate of 7.16 per cent.
The same borrower, by refinancing to one of the lowest variable rates of 5.25 per cent, could reduce monthly repayments to about $5900, says RateCity.
The couple bought their Nelson home for $1.2 million in 2021, taking out a more than $1m loan with one of the big four banks. Initially, they paid about $4000 a month in home loan repayments. But when their one-year fixed term ended, payments jumped to $5142 a month on a refinanced 3.99 per cent rate. Now payments are set to hit $6710 in March...
https://www.nzherald.co.nz/nz/brings-tears-to-my-eyes-family-consider-s…
1000's in Auckland purchased around 1.2 mill with around 200k down, several on here have been constantly telling the spruikers that there is a tidal wave of defaults coming. The buyers are waiting.
Does anyone have access to figures for NZ in 1990 for:
1.the average household income ?
2. average cost of an NZ house ?
3. average mortgage interest rate ?
As having bought NZ property in this market above and the current market, we should be able to sort this out, as to whether it was financially "easier" then or now.
My opinion is it would be way harder now, than in 1990....even just to save for a deposit to start with !
1990 was in the middle of an exceptionally low period (approx 1988-1993) for both house price inflation & incomes, following the 1987 crash & Nationals Employment Contracts Act+Mother of all budgets. Interest rates were also higher before the crash.
Use the Big Mac Index. From memory it was about 80,000 big macs to buy a median house in central Auckland suburbs in 1995. Now it is about 180,000.
You need to forgo a lot more big macs/avocado toasts to buy a house these days. Big Macs operate in the free market. Houses not so much.
Though to confound things is a Big Mac is still "3 bedroom" or has it shrunk to "2 bedroom"?
I'm pretty sure Big Macs have shrunk in the past few years
Bought my first house in 86 for $90k. Took me 6 years to save a deposit of 20k. I was single and renting in a flat at $50 per week. Borrowed 60k from the bank at 18 % interest and had to get a 10k second mortgage from the vendor for 12 months at 12%(tax free to the vendor). A friend bought a $100k Ponsonby villa with $5k deposit and 23% interest rate to rent out. He bought another one 12 months later. All my peers, early 30's, were buying houses. My mortgage payments were $1350 per month on a ~20k after tax salary. I remember it was a struggle keeping within my budget. The bank said they wouldn't normally lend at this level but I was a young man with a bright future. He said I wasn't as bad as some who were maxing out on their credit card in order to meet the deposit. In order to make ends meet I had to get two flatmates so I could buy food and petrol. I was made redundant in 91. The redundancy payment and 10 years of company super contributions paid my mortgage off completely. Planned to take 6 months off to renovate the house and sell and go to Australia. A job I couldn't turn down came up 3 weeks after redundancy. The guy with the two Ponsonby rentals put them in the hands of a property manager, got married and went to Canada. Another colleague, accountant with a young family 3 years service, wasn't so lucky. Still unemployed 12 months later, I believe he lost his house to mortgagee sale.
House price to median household income was 3x, and the interest rate was approx. 10%.
Liquidation advertisements for 25 January 2023:
Company: STREAMLAND TECHNOLOGY SERVICE LIMITED;
Plaintiff: Qian Yu;
Business: Computer maintenance service;
-
Company: CITY & SUBURB PROPERTY INSPECTIONS (2014) LIMITED;
Plaintiff: Daniel Paul Wai-Poi and Catherine Migden-Ostrander;
Business: Engineering consulting service nec;
-
Company: OM LIQUOR LIMITED;
Plaintiff: Eurovintage Limited;
Business: Wine and spirit merchandising – retail;
-
Company: CCL DEVELOPMENTS LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business: Building, house construction;
-
Company: ELITE LANDSCAPE AND DESIGN LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business: Civil engineering consulting service;
-
Company: RAYMOND HICKS CONTRACTING LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business: Agricultural services nec;
-
Company: RIGHT SCAFFOLDING LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business: Scaffolding construction;
-
Company: SADAL UPPER HUTT LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business: Hairdressing service;
-
Company: SAS TRANSPORT LIMITED;
Plaintiff: Commissioner of Inland Revenue;
Business:
What am I supposed to see here Llama? lol
Just thought I'd see if anyone was interested in the types of companies that are facing liquidation at the moment.
and you thought we couldn't read it, if it wasn't written in bold?
A snapshot in time is fairly meaningless without context. The latest Financial Stability Report has the number of insolvencies, voluntary administrations and receiverships for construction and development companies, it has been picking up quite significantly last year. We'll only get an update to this in May though so quite a way off.
Quarter | Construction | Development
31/03/2019 | 12 | 4
30/06/2019 | 23 | 0
30/09/2019 | 25 | 0
31/12/2019 | 22 | 2
31/03/2020 | 23 | 3
30/06/2020 | 10 | 2
30/09/2020 | 23 | 1
31/12/2020 | 19 | 4
31/03/2021 | 35 | 4
30/06/2021 | 47 | 1
30/09/2021 | 49 | 3
31/12/2021 | 32 | 3
31/03/2022 | 52 | 1
30/06/2022 | 64 | 7
30/09/2022 | 118 | 8
Great info thx. Yep really picking up in construction and development.
Will have to have a look at this financial stability report. Does it inform the decision making of the RBNZ at all ( given financial stability is one of their mandates) ?
Yes, in fact the RBNZ is the one that produces the report.
Remember when yield curve inverted back last March and Powell totally dismissed by claiming it's no big deal until the near term forward spread inverts. Well, that inverted a few months ago. Since media doesn't practice journalism, nobody asked Powell. Link
Musk is purportedly planning to sell $3 billion of his stake in Twitter. Twitter was estimated to have a value of $13 B when he paid 44B for it. Musk's debt alone is the actual market worth of the company when he paid for it.
Will be interesting to see if he can pull it around. Been using twitter actively for a year and seen vast improvements in last few months let alone the amount of people paying $8 USD a month for twitter blue.
It sounds like a drunken purchase on trademe that seemed like a good idea at the time.
I reckon he got so cocky he didn't think he could fail, even after paying so much over market value. I guess we will find out.
Tesla is up 30 % in January ... new sales & revenus are at record levels ... buy me a cold brewski you guys who followed my late December advice to back the truck up & get as much TSLA as possible ... 100 % gain by 31/12/23 ...
... and , a big sux yabooo to the numpties to said Tesla is going to zero : more fool you !
See that Tesla Y that some guy drove over a 250ft cliff in an attempted murder/suicide, except they all survived. Amazing.
https://www.nbcnews.com/news/us-news/luck-tesla-family-plunged-cliff-rc…
Retail home loan interest rates are substantially lower in Australia than New Zealand right now anyway. They have plenty of room for larger rate increases.
The Bank of Canada signalled that it would become the first major central bank to stop hiking interest rates. After inflation slowed from 8.1% in June to 6.3% in December, it raised interest rates by a quarter of a percentage point, to 4.5%, their highest level since 2008. The bank’s governor said it would implement a “conditional pause” on further hikes.
This is what I expect we will see in other economies. Increase until the heat starts to dissipate and then pause and watch.
The Bank of Canada signalled that it would become the first major central bank to stop hiking interest rates.
Cheers of celebration around the Anglosphere.
A sign of things to come? https://www.stuff.co.nz/business/131069316/warehouse-group-plans-to-cut…
I was told The Warehouse had one of their worst Christmas trading periods ever. Their demographic is getting particularly crushed by inflation.
Super in NZ needs an upgrade,
Australian employers put in 10.5% to employees super accounts as a non negotiable. This is increasing to 12% in 2025, whereas NZ employers approx 2% (as employer kiwisaver contributions of 3% are taxed)
NZ needs to look outside its boundaries, do benchmarking and get ideas from overseas. I can't believe no one is talking about how low employer contributions are in NZ. The retirement commission recommended a phased increase over time and I think its time to start thinking about it.
Eg this article talks about NZ av balance in their 40s around $40K and Aussies at $130K. Then extrapolate that out 20 years to work out how different the balances will be when people retire.
https://www.stuff.co.nz/business/money/300625160/people-in-their-40s-fa…
We also tax year-on-year which defies the point of a savings scheme that accumulates and compounds over your entire working life, while others tax on exit. You are substantially better off under the latter system than the former. It is the biggest weakness with Kiwisaver and should be addressed immediately, not bundled up and then sidetracked with the discussion around compulsion (which is wrong IMO).
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