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%.
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103 Comments
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.)
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.
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.
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)...
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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?
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…
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.
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.
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…
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.
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.
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…
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.
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.....
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 :)
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.
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.
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.....
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.
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%
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.
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.
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.
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%+?
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
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.
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.
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 😫
At least Sweden’s central bank has a (dry) sense of humour:
https://m.investing.com/news/economy/swedish-central-bank-chief-says-mo…
Property investment now ‘a financial black hole’:
https://www.macrobusiness.com.au/2023/03/investors-flee-crashing-housin…
Grantham sees a bear market deep into 2024:
https://markets.businessinsider.com/news/stocks/jeremy-grantham-stock-m…
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