What happened Monday

Business / news

A review of things you need to know before you sign off on Monday; household deposit review, mortgage risk from floods, more green bonds, China starts 2023 on dour note, swaps lower, NZD stable, & more

27th Mar 23, 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
Bank of China raised all its fixed rates today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None today. But this is a big-picture look at the household deposit segment.

IT REALLY IS A MASSIVE THEFT
The more Latitude looks, the worse its security breach is revealed. Now it says millions of driver's licence details, tens of thousands of passport details pilfered in cyber attack.

RBNZ HIGHLIGHTS DATA GAPS IN BANKS' MORTGAGE EXPOSURE TO FLOODING RISK
The Reserve Bank (RBNZ) has put a bit more meat on the bones of estimates of the potential risk to banks' Auckland residential mortgage exposures to flooding risk and sea level rise. This comes in a Bulletin article published Monday, fleshing out what the RBNZ said in November's Financial Stability Report. It says the work highlights data gaps, especially pertaining to rainfall flood risk and portfolio location data.

A LITTLE RESPITE
The seasonal rise in meat processor livestock schedules has started again. Overall prices aren't as high as last year but they are still higher than two years ago. Of course, that isn't much comfort given the high current levels of operating cost inflation. You can see he overall movements here. And the prices from individual processors here in the RH sidebar.

MORE 'GREEN' BONDS
Contact Energy confirmed it is seeking $300 mln for a 6-year fixed rate, unsecured, unsubordinated green bond. They say the minimum rate offered will be 5.40%, but the actual will be swap plus a margin or between 1.35% and 1.50%. Based on today's opening swap rate, that could mean a yield of 5.75% if current rates are similar when the bond closes on March 30. The bonds will likely be rated BBB.

A GRIM START TO 2023
China reported that is industrial profits suffered a sharp retreat on their reopening in February, down more than -22% year-on-year. This report hurt both the Hong Kong and Shanghai equity markets because is was so unexpected.

SWAP RATES LOWER
Wholesale swap rates have probably slid again today. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 5.17% and still +42 bps above the current OCR. Markets are pricing in less than a +25 bps rise at the next RBNZ review on Wednesday, April 5, 2023. The Australian 10 year bond yield is now at 3.19% and down -5 bps from Friday. The China 10 year bond rate is little-changed at 2.88%. And the NZ Government 10 year bond rate is now at 4.10%, down -6 bps and unusually below the earlier RBNZ fix at 4.11% which down -2 bps from Friday. The UST 10 year yield is now at 3.38% and little-changed.

EQUITIES START POSITIVELY, EXCEPT IN CHINA
The NZX50 has started the week up +0.2% in late trade today. In afternoon trade, the ASX200 is also up just +0.2%. Tokyo has opened up +0.3%. But Hong Kong is down a sharpish -1.7% in their early trade. Shanghai is down -0.7% at their open. The S&P500 futures suggest Wall Street will open tomorrow with a strongish +1.1% rise.

GOLD IN MINOR SLIP
In early Asian trade, gold is down -US$5 from this morning, now at US$1973/oz.

NZD HOLDS
The Kiwi dollar has changed little since this morning, still at 62 USc. Against the Aussie we are softer, now at 93.2 AUc. And against the euro we are holding at 57.6 euro cents. That means the TWI-5 is now at 70.1 and little-changed.

BITCOIN LITTLE-CHANGED
The bitcoin price has risen +0.4% from this morning, now at US$27,855 US$28,336. Volatility has been modest today at +/-1.3%.

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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103 Comments

by David Chaston | 27th Mar 23, 3:22pm 1679883754

Readers are reminded that interest.co.nz is not a platform to debate the culture-wars raging in other countries, especially the UK and the US. We are here to discuss the influences on the NZ economy. (An exception today may be on Chris Trotter's separate opinion piece. Relevant comments of a respectful nature can go there, of course.)

by J.C. | 27th Mar 23, 4:29pm 1679887767

Readers are reminded that interest.co.nz is not a platform to debate the culture-wars raging in other countries,

Fair call that should be respected. Regardless, I would phrase this as "debate the culture-wars raging in all Anglosphere countries,"

We are here to discuss the influences on the NZ economy.

Just my humble opinion, but it's possible the culture wars are related to frustrations surrounding the implosion of the credit-driven bubble economies promoted by the Anglosphere in particular.

No more.

by Miguel | 27th Mar 23, 7:53pm 1679900034

I've always seen the "culture wars" as just an extension of the trend in American politics where the use of highly emotive issues are used to keep the masses angry at each other, to distract from the fact 0.1% of the population is gobbling up an ever increasing portion of the wealth and resources of the planet. I think its no surprise the use of astroturfed groups, increasing polarizing news coverage and culture wars has significantly ramped up since the occupy wallstreet protests after the GFC.

by Fossil Lover | 28th Mar 23, 7:32am 1679941937

And in NZ it was the vaccinated verses unvaccinated and the hideous vaccine passport, lockdowns, masks, social distancing to keep the masses angry at each other. NZ has not been the same since, blame Covid, blame Putin, blame the bankers, but I put the blame squarely on NZ government. (Government knows best)...

by solardb | 27th Mar 23, 10:11pm 1679908261

When your house value is rising, things feel fine, when they are dropping, not so much. Sam Neill noted how he couldn't believe the change when he came back to NZ, everybody whinging about everything.

by HSL | 27th Mar 23, 5:25pm 1679891137

I think these culture wars play a huge part on the nz economy, namely political risk. Companies and high skilled individuals are likely to avoid nz if government and left wing groups continue their attack on society. Likewise skilled workers are likely to up sticks and leave to countries that have not been infested with this divisive woke culture. In saying that, I get your point to a degree.

by Fegus Woodward | 27th Mar 23, 6:00pm 1679893227

Spot on - if there was a right wing politician making straight up racist statements, there would not even be a debate they would (and should) be removed from their post. I would also argue that there would be comments open on this website if the parties were reversed.

Governments accepting racism is a huge political risk about how you invest. Marama Davidson needs to resign or be removed, totally unacceptable.

by solardb | 27th Mar 23, 10:20pm 1679908856

Bit of context, she had just got hit by a male on a motorcycle, and was been wound up by a known white supremacist ,(muted, and apparently a poster on this site). She has admitted her comments were wrong, though statistics do say the majority are white straight males. Majority is not all, so she had to back down.

by HSL | 28th Mar 23, 7:16am 1679940979

Did you see that video on interest. Totally unacceptable. I thought it was destiny church anyway…

by chebbo | 28th Mar 23, 7:18am 1679941137

You're missing the point completely solar. The majority may also be lower-quartile income earners. They may be sports fans. They may drive Ford Rangers. The point is that none of these things have anything to do with their actions, and neither does race, gender, or sexuality. Trying to make it about those things is discriminatory, regardless of whether those claims are supported by statistics or not.

by solardb | 28th Mar 23, 8:09am 1679944169

I'm not saying she was justified in saying it, just that she was obviously very stressed. If you had been just hit by a woman, you'd probably let off a tirade against women, and if you were been wound up by a Maori, against Maori. And likely regret it afterwards.

by chebbo | 28th Mar 23, 8:13am 1679944395

Absolutely not. It's somewhat concerning that you consider that sort of reaction to be the obvious one.

by Fegus Woodward | 28th Mar 23, 9:29am 1679948969

If it was a right wing politician you wouldn't be parroting about context. You are justifying racism.

by HW2 | 28th Mar 23, 10:05am 1679951121

💯

Happens all the time. But then, this election, I will be holding them all to account, left and right

by agnostium | 27th Mar 23, 7:35pm 1679898906

I think these culture wars play a huge part on the nz economy, namely political risk. Companies and high skilled individuals are likely to avoid nz if opposition and right wing groups continue their attack on society. Likewise skilled workers are likely to up sticks and leave to countries that have not been infested with this divisive reactionary culture.

by agnostium | 27th Mar 23, 7:36pm 1679898999

I hope you can see the issue with your post and why it's called culture wars and why we should not get involved and leave it to the yanks and the Brits.

by HSL | 27th Mar 23, 7:50pm 1679899853

Or you could argue that not getting involved allows the perpetrators to continue unabated. For the NZ economy to survive we rely on our international reputation, think tourism etc. This is being eroded by certain sectors of society. Make no bones about it, this is the radical left led by green, labour and Māori parties.

by kiwikidsnz | 27th Mar 23, 9:06pm 1679904396

I hope you can see the issue with your post.

Hint: who has spent the last 2 years attacking NZ society ?

by HSL | 27th Mar 23, 9:30pm 1679905826

Who would that be?

by sit23 | 27th Mar 23, 11:33pm 1679913205

What about discussing the bits of the NZ economy mentioned in the interest.co.nz post above? That is what this comments section is for.

by Squishy | 27th Mar 23, 7:25pm 1679898331

When it comes to ideological arguments my preference is for a moderated university debate type scenario over a public brawl in the streets. I'm sure both sides have excellent arguments and counter arguments but we, the public, are none the wiser to what those might be. It's also more becoming of a society that is open to courting ideas and finding a path for progress.

by Noncents | 27th Mar 23, 7:51pm 1679899897

Personally, I think this could have massive influence on NZ Economy.

A sitting Cabinet Minister in the NZ Government stated "That is white cis men who cause violence in the world."

How will this sit with our trading partners?

by singautim | 27th Mar 23, 10:02pm 1679907723

I went to add my respectful comment but despite my $100 per year was not permitted.

So from Chris Trotter's best ever opinion piece: ""the crucial role played by the mainstream news media in creating the preconditions for the violent suppression of free speech which ensued"". I'm a subscriber to the NZ Herald and Chris Totter's remark is accurate for that newspaper. I have no problem with the Herald's editor expressing an opinion but as a paying reader I deserve to read accurate facts among the unqueried smears by association.

This from Newsroom's daily briefing ""Are we going to wait for another act of terror on our shores – this time against our LGBTQ+ community – to focus on the bigoted content of someone’s speech, rather than their supposed ‘right’ to say it? ""

The violence last weekend was strongly prompted by NZ media. Interest.co.nz does not share the blame.

See YouTube for British comments.

by IT GUY | 27th Mar 23, 4:06pm 1679886412

Mortgage customers showing early signs of stress: NAB

NAB’s Consumer Stress Index for Q1 points to growing strains on mortgage borrowers from the higher cost of living as rate rises start to bite.

Coming to a town/city near you......

I see Auckland CC are ditching some office space here in AKL, I have heard that plenty of students with IPADs are doing desk utilisation surveys in the City of Sails.... We are talking prime office space.

by Jonny.Foe | 27th Mar 23, 4:49pm 1679888944

Commercial real estate was on my list of things that might break first.

by JamesM | 27th Mar 23, 5:02pm 1679889730

I have some expertise in this space. Unfortunately in terms of cost the horse has bolted. ‘Fitting out’ this space has cost the equivalent of 3 years gross rent and disposing of it will likely cost 1.5-2 years gross rent once lease up periods, tenant incentives, agency fees, makegood costs etc are realised.

Just to make you fell a bit worse what I have witnessed over the last 5 years in the govt sector makes this look like spare change.

by Advisor | 27th Mar 23, 5:07pm 1679890021

In the event of a Nat-ACT swing to power later this year, Wellington vacancy rates could skyrocket too, ACT being the key object here.

by agnostium | 27th Mar 23, 7:41pm 1679899273

Nah, it will be the same people doing the same work but instead of being based in government offices they will be based in consultancy forms.

When National cut staff numbers the work just gets done by consultants as it's easier to hide the headcount.

by Advisor | 27th Mar 23, 9:46pm 1679906813

I wasn't talking about crony Luxon. If ACT wants to spend more than a single term in government, they will have to deliver on the bold promise of cutting back-office public sector funding.

It won't take a rocket scientist to weed out all the wasted spending and unwanted bureaucracy from our public agencies.

by singautim | 27th Mar 23, 10:09pm 1679908162

It is always difficult to remove bureaucrats. The really good ones leave before they are even asked and the bad ones unable to hold down a decent job elsewhere dig in. The solution is to ask do we need the public agency. For example I'm not sure if it still exists but Auckland council used to have an expensive tourism department with a well-paid employee in London. Did NZ need both a national and an Auckland city tourism agency?

by Rob Reid | 27th Mar 23, 5:08pm 1679890115

Oh yeah, a couple of times recently I've notice kids with iPads wandering through apparently counting.

Must be massive savings to be had by giving up underutilised space.

by HouseMouse | 27th Mar 23, 4:08pm 1679886489

High levels of debt may hold back new construction in retirement village sector:

https://www.rnz.co.nz/news/business/486807/debt-holding-back-retirement…

by IT GUY | 27th Mar 23, 4:19pm 1679887174

WhoCouldHaveNooed

by Jonny.Foe | 27th Mar 23, 4:53pm 1679889202

The retirement village sector - aka 'property speculation with a sideline in aged care'. Next stage of this game is the lobbying for Govt subsidies, sweeteners and free land to avoid the inevitable 'care capacity apocalypse'.

by Hardly | 27th Mar 23, 5:11pm 1679890273

The government chronically underfunds aged care so if there is a subsidy it’s from people living in retirement villages to the government.

by Jonny.Foe | 27th Mar 23, 5:40pm 1679892003

Aged care in NZ is effectively paywalled - like dental care, physiotherapy etc. I am not sure I understand your subsidy point though - should the state pay for the care and accommodation of an older person with a high net worth? I am not saying they shouldn't, just wanted to be clear what you meant.

by Hummy | 27th Mar 23, 4:16pm 1679886961

Would there be a point for taking of the fuel subsidies? Now oil prices are lower and to avoid another reason for business to lift prices in June again.

by Uninterested | 27th Mar 23, 7:06pm 1679897179

They could, but even though they deliberately kept it going so that the annual CPI was as low as possible, to take it off before the election would actually bump up the Reserve Banks OCR by some percentage. Plus the press would be really bad.

by oscar87 | 27th Mar 23, 8:45pm 1679903155

How tf are we paying for the roads which we could barely afford to maintain before? Falling oil prices, tax subsidy, a couple of floods and cyclones, more and more EVs that only pay like $100 rego per year, plus increased H&S regs for any kind of work. Doesn't bother me much as a cyclist but I would hate to be in charge of budgeting this for next five years.

by Sluggy | 28th Mar 23, 5:53am 1679936018

EVs are the poster boy of economic trickle up.

by Fossil Lover | 28th Mar 23, 7:43am 1679942587

NZ cannot even afford the traffic control (another government enforced worthless enterprise), let alone maintain and fix our crumbling roadways.

by Antz | 27th Mar 23, 4:19pm 1679887157

From this: RBNZ HIGHLIGHTS DATA GAPS IN BANKS' MORTGAGE EXPOSURE

This concentration of banks' financial risk in Auck struck me: "mortgage loans in Auckland make up half of the national total"

by bw | 27th Mar 23, 4:34pm 1679888042

And I'll suggest that not all those Auckland loans are used to buy Auckland properties.

When time get tough, as they are about to, then that investment portfolio in Eketahuna is going to be first to market.

by HW2 | 27th Mar 23, 5:36pm 1679891786

Tokoroa is a favourite for investors

Mind you, the next town north, putaruru is experiencing strong growth from retirement sector.

by IT GUY | 27th Mar 23, 7:01pm 1679896879

Location, Location, Location...... Putaruru...

by Rob Reid | 27th Mar 23, 8:06pm 1679900763

You're a John Clarke fan. Remember this? Taihape and Whakatane up there with the best of them:

https://www.discogs.com/release/601506-Fred-Dagg-Fred-Daggs-Greatest-Hi…

by IT GUY | 27th Mar 23, 8:51pm 1679903497

I cried when he died

by IT GUY | 27th Mar 23, 4:44pm 1679888686

Feels about right Antz given how much more expensive AKL is to many places, how in places like Tauranga much of the higher price homes have no mortgages etc....

Its why I take so much interest in this market..... whats happening in most other locations is noise... the regions will folow AKL/WGTN down.

The Taupo bays is about to get hit real hard.

by HW2 | 27th Mar 23, 5:38pm 1679891936

IT Guys phrase of the day "is about to". I could possibly even say, its his phrase of the last 2 years.

by IT GUY | 27th Mar 23, 7:03pm 1679897013

Should have listened to me earlier then HW2 Remember I sold at the top while you where Spruiking ya guts out.

by HW2 | 28th Mar 23, 10:08am 1679951300

I'm neither spruiker, doomie nor trader.... Will leave that for you

But consider myself a longterm holder.

by HSL | 27th Mar 23, 5:31pm 1679891505

Makes up half of the population too doesn’t it? I suspect from reading other news sites that if you keep your job through the recession you will generally be ok. Saying that where I am there are a huge number of houses coming up for sale. Worrying times

by OldSkoolEconomics | 27th Mar 23, 10:30pm 1679909433

In bad times keeping ones job is a great idea (if you like working for other people). However many private sector employees get serious anxiety and stress from worrying they might be let go and working hard not to be next out the door.

Equally there are always lots and lots of opportunities if you are a business owner or self employed and smart.

by J.C. | 27th Mar 23, 4:40pm 1679888452

Good heavens.

Biden's clean-energy law will cost roughly $1.2 trillion - 3x govt projections, according to the Vampire Squid.

WSJ says that the IRA may go down as one of the greatest cons ever on the American taxpayer.

https://www.msn.com/en-us/money/news/inflation-reduction-act-to-cost-us…

by Von Metternich | 27th Mar 23, 4:53pm 1679889226

The unsecured bond issuance by the Power companies is largely uncommented here.

If you read the balance sheets of these power companies, they have largely been financialising their dividends through lending like that. Obviously it was viable in low interest rate environments, but it comes across as a robbing peter to pay paul situation with the current interest rates. The prices of these power company stocks need to fall alot to be worth investing in over riskless or bank account savings.

I wonder if the dividends will drop significantly or power prices will rise to cover that debt burden. Either way, not a good sign.

by HouseMouse | 27th Mar 23, 4:59pm 1679889596

Good point, and there’s lots of these stress points if you look hard enough

by Uninterested | 27th Mar 23, 7:17pm 1679897820

Alas, they are always quoted as defensive stocks....

by Officebound | 27th Mar 23, 5:06pm 1679890019

You have to give special credit to the person who paid $145k for a place 20 years ago, and still managed to go under in a mortgagee sale.

https://www.trademe.co.nz/property/residential-property-for-sale/auctio…

For sale | 3 Mary Place, Favona, Manukau City, Auckland - homes.co.nz

Of more interest as I watch Mortgagee sales, are the amount that sold late-2021, that are now at mortgagee.

Noting that it would usually take at least 12 months from payment arrears starting, to bank taking it to market, I suspect there is a tidal wave of early 2022 sales, waiting to be bought to market by the banks, held back only by their fear of liquidating too many, and further risking solvency of the rest of their customers.....

by Pragmatist | 27th Mar 23, 5:26pm 1679891199

Financial abuse of elders. House used as ATM to fund various family members wasteful spending. Just my guess.

by HouseMouse | 27th Mar 23, 5:28pm 1679891326

Any particular patterns you are seeing on mortgagee sales? I suspect there might be a fair few ‘development sites’ that were purchased by amateur developers that will be mortgagee.

ie. sites between 650-800 square metres, in South Auckland suburbs.

by HouseMouse | 27th Mar 23, 5:40pm 1679892015

And on cue the first mortgagee property I found on searching is one for sale in Otara. Circa 750 square metres, was bought in November ‘21 for………..$1.1 million

Stupid bubble nonsense

by Officebound | 27th Mar 23, 6:02pm 1679893349

Search thread link (not sure if it will translate well)

Property search results - Find real estate on Trade Me Property

- Mostly Auckland, increasingly Chch

- Small house, big section is common

- Late 2021 last sale date is common as I mentioned, but this has been 'rolling on' in the last 6 months, thus why I suspect early 2022 is coming soon

- Surprisingly, mostly proper looking houses, weatherboard, brick etc, I would expect more plaster/hardiboard.

-Between trademe's mortgagee listings, What does my landlord own? and New Zealand Companies Register (companiesoffice.govt.nz) there are many more personal insights to be had :)

by HW2 | 27th Mar 23, 6:33pm 1679895189

So one person came a cropper, you're easily impressed

If you want to see high mortgagee stats look at the GFC data. Where there was up to 800 at a time.. in Auckland currently 21. Put it in lights Housemouse.

I found a stuff article from.last year eagerly anticipating a catalogue of mortgagee sales. So you're not alone.

by JimboJones | 27th Mar 23, 6:41pm 1679895715

Agree, there is no real signs of significant stress at the moment. It’s probably just developers at the moment, need job loses for more owners to go under.

by Ahuhyeah | 27th Mar 23, 7:10pm 1679897422

Mortgagee listing count via search trademe

October = 26

March 4th = 28

Today = 39

As posted previously waiting to see if it's an anomaly or a trend.

Others have noted discrepancy in the detail of some listings. I can't be bothered with more than my lazy search. Make from.it what you will.

by Officebound | 27th Mar 23, 6:57pm 1679896637

Agree, we're not near GFC levels by any means yet.

At the same time, from through the GFC period, the OCR went up 2% from valley to trough (2005 - 2008), and this was only suspended by it dropping to pre-2006 levels to under-write the market.

In this cycle, we've done double the increases in half the time, with no capacity to go lower than the rates we started at.

From a relativity perspective, OCR rates in the GFC went up by a quarter, this time around, its 19 times what it was.

Being that mortgagee sales went from 100 to 800 in 12 months last time, well.....

by JamesM | 27th Mar 23, 10:44pm 1679910265

Ray White are about to list another 90 mortgagee sales shortly. Already been appointed agents.

by HW2 | 28th Mar 23, 6:52am 1679939556

Is it the inside gossip... Which areas in particular

by HSL | 28th Mar 23, 7:26am 1679941585

It’s pretty sad, that’s 90 families whose lives are potentially ruined.

by JimboJones | 27th Mar 23, 6:44pm 1679895863

1000 square meters, looks flat, would have been worth a lot more 1 year ago, maybe even double. Crazy times.

by HouseMouse | 27th Mar 23, 6:52pm 1679896332

No way.

Flood prone, coastal erosion and low density zoning. And not a very nice location.

by HW2 | 27th Mar 23, 9:18pm 1679905126

Are you being short-sighted (again). You said you want to buy below fair value, what better than a mort sale where the vendor does not owe a great sum. The bank is free to set a lowish reserve and sell it up for the best offer

1032 sqm metres fits your 3x3 vision.

Existing house that holds little value but still provides cashflow until you are ready to carry out the "masterplan". Even if it requires some expense to bring it to HH, that cost will be reflected in purchase price.

Its not an area that appeals to me, it could hold potential. The site layout looks interesting from a development perspective

Over the weekend I listed a house extension job for the arch services and got 8 excellent replies.

by lonewolfnz | 27th Mar 23, 5:58pm 1679893086

There is a great image doing the rounds of crypto twitter.

It shows an image of the president of Credit Suisse back in 2017. His quote is "Bitcoin at $7000 is the very definition of a bubble"

It then shows the price change since then:

- CS stock price -99%

- Bitcoin +283%

by JimboJones | 27th Mar 23, 6:38pm 1679895537

Haha. Although I’m sure there were some similar comments made by Bitcoin exchange CEOs.

by J.C. | 27th Mar 23, 7:37pm 1679899063

Although I’m sure there were some similar comments made by Bitcoin exchange CEOs.

Not really any such thing as a 'BTC exchange'. They will sell BTC and other "cryptos."

And BTC itself doesn't have a CEO.

by JimboJones | 27th Mar 23, 6:09pm 1679893768

Random thought: we were struggling to find decent things to invest in when debt was almost free, there must be very few investments being made now (by investing I mean actually creating or growing a business not buying a house or bitcoin).

I can’t see interest rates staying high for too long.

by Pa1nter | 27th Mar 23, 6:18pm 1679894333

I think there's actually some pretty good opportunities around the place it's just whether you've the appetite for the risk.

by HouseMouse | 27th Mar 23, 6:31pm 1679895061

Buying good (I emphasise ‘good’) development sites in good locations isn’t a bad option if you are cashed up. It’s what I would do if I had a spare few million $. Potentially some good bargains to be had in the coming 12 months.

by Pa1nter | 27th Mar 23, 6:33pm 1679895195

I was thinking more non-RE investing as Jimbo mentioned. There's some decent gaps in some markets, and also boomers needing to cash out of existing businesses, that would benefit from upgrades to internal systems.

by HouseMouse | 27th Mar 23, 6:43pm 1679895817

Fair enough. But I know what I know.

Would probably look at a circa 500 square metre site, flat with good access to services. I would be looking to buy at least 30-40% below CV. And I would look to build 3 townhouses (with no resource consent) under the government’s new planning rules.

But would need circa $2 mill or a little more to do this without borrowing, so dreams are free.

by JimboJones | 27th Mar 23, 6:48pm 1679896103

Who are you going to sell them to?

Our area is zoned mixed residential (one per 400m2 I think) yet council have been handing out resource consents for 5 or more on 800m2, so the new government planning rules just save the cost of the resource consent, probably minimal of the total investment.

by HouseMouse | 27th Mar 23, 7:00pm 1679896855

We were talking investments right? Rather than speculation.

I would hold them, with a gross return of circa 6-7%.

So effectively micro ‘Build to Rent’.

by Officebound | 27th Mar 23, 7:06pm 1679897181

Assuming the first place cost you $1m, you are $3m in the hole.

I'll be generous and suggest $1k a week for each place ($1m places dont often rent for $1k)

Let's say 100% occupancy, $2k insurance and $2k rates (because I'm nice, you won't actually find this)

You just ended up at 4.8%, before other expenses, maintenance, vacancy etc. How are you going to turn that into 6%+?

by HouseMouse | 27th Mar 23, 7:24pm 1679898258

Site purchase say $800k

Build cost of 3 x 3 bedroom (compact) townhouses $1.2 mill (incl. site works, landscaping)

Fees and sundries say 100k.

Total = $2.1 mill

Rental income for each townhouse = $800 pw. $40k per year. X 3 = 120k gross.

Ok a yield around 5.7%

And probably doing well to get more than $750 pw rent actually, let alone $800

by HouseMouse | 27th Mar 23, 7:33pm 1679898824

That was a good little exercise confirming how dire residential development is.

If you were selling those townhouses at circa 950k, that’s a gross yield to any potential buyer of no greater than around 4%

And this is based on getting a site 30-40% below CV!

by JimboJones | 27th Mar 23, 7:21pm 1679898069

If it wasn’t for the recent craziness in capital gains you could assume the 4.8% was after inflation - the value of the house should keep up with inflation in a normal world. That isn’t a bad return.

But in the current world I’m not sure house prices will keep up with inflation even in the very long term. It’s a gamble at best. But my ability to predict future house prices is particularly poor.

by IT GUY | 27th Mar 23, 7:10pm 1679897438

HouseMouse - If you have 2-3 mill you can open up higher yields by investing in solid businesses.... forget rent to build.

by HouseMouse | 27th Mar 23, 7:22pm 1679898126

I am sure you are right. And now I have done back of the envelope sums, it doesn’t look so great anyway…

by JimboJones | 27th Mar 23, 7:49pm 1679899772

It all comes down to the capital gain. If you assume no capital gain at all then it looks bad. I think that is highly unlikely in the long term and I say that as a property bear. Even a 2% average gain over say 15 years makes it almost worthwhile.

And then there are the tax perks. 5% after (no) tax plus no capital gains tax if National get elected.

by Officebound | 27th Mar 23, 7:03pm 1679897021

Yes, and when you borrow the 2 mil, at 10% (if you're lucky), and take 2 years to start seeing cashflow, $200k of your expected profit turned to dust.

by HouseMouse | 27th Mar 23, 7:51pm 1679899908

Yes. And most of these amateurish developers were borrowing heavily and/or highly leveraged. In a market that was crashing, with lending for both developers and buyers skyrocketing = big trouble

The scenario I describe is if you have lots of cash and don’t need to borrow. And even that isn’t so good 😫

by IT GUY | 27th Mar 23, 7:11pm 1679897487

NO and thats why they have lots of cash....

by HW2 | 27th Mar 23, 8:42pm 1679902972

Property stocks are up on the local bourse following wall streets lead. Buyers are seeking value and re-entering the market.

by JimboJones | 27th Mar 23, 8:48pm 1679903317

I’m not sure you would enter the property market if you wanted value. $1 mil for a shitter in papakura is value?

by HW2 | 27th Mar 23, 8:51pm 1679903499

Was referring to the likes of stride, kiwi, Goodman etc

The All Property Index rising 2.96 pct

by IT GUY | 27th Mar 23, 9:03pm 1679904235

Poor old man is grasping at any straw... march sales numbers out soon HW2, Place your bets....

by HouseMouse | 27th Mar 23, 8:52pm 1679903572

At least Sweden’s central bank has a (dry) sense of humour:

https://m.investing.com/news/economy/swedish-central-bank-chief-says-mo…

by HouseMouse | 27th Mar 23, 8:59pm 1679903991

Property investment now ‘a financial black hole’:

https://www.macrobusiness.com.au/2023/03/investors-flee-crashing-housin…

by IT GUY | 27th Mar 23, 9:06pm 1679904390

Property porn right there HW2, fill your boots.

by HW2 | 27th Mar 23, 10:23pm 1679908986

Its obvious you can't get me out of your head haha

by HSL | 27th Mar 23, 9:20pm 1679905234

Oh dear and I fear it’s only just started. Seeing interest rates taking effect now, and that’s at 4% so going to get ugly.

by HouseMouse | 27th Mar 23, 9:23pm 1679905396

Grantham sees a bear market deep into 2024:

https://markets.businessinsider.com/news/stocks/jeremy-grantham-stock-m…

by mikekirk29 | 28th Mar 23, 7:07am 1679940441

Unexpected again in use I see re China

Given cv19 and US equity and tech flight it should be no surprise at all. Regrettably exactly errs seem to spout unreality based on what they would like to be so not what is