Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
TERM DEPOSIT RATE CHANGES
None here today either.
RECORD RUSH
The rush to buy property is extending to lifestyle blocks. There were 855 sold nationwide in February, +31% more than in February 2020 and +57% more than for February 2019. This is an extension of recent gains and for the past three months the rise is +40%. Whatever way you look at it, this segment of the property market is very buoyant. The February 2021 sales were the most for a February, ever.
MORE SALES, BUT PRICES MORE CIRCUMSPECT
Farm sales in February were also strong but only a six year high for a February. All farm types are selling well; there were 26 dairy farms sold in the month, back up to levels that existed in 2017 and 2018, so this market has recovered after a few slow years. Buyers are much more cautious on price however, reflecting these are businesses and loans need to be repaid out of earnings. Overall, prices per hectare are flat or lower over the past few months, but are up strongly year-on-year. Bu that may be more due to the changing mix of property types being sold. Dairy farms sold in February were -7.0% lower on average on a per hectare basis that a year ago. Finishing units were up +15.5% on the same basis. And grazing properties were up +15.8%.
BANK DEPOSITS DIP
Total deposits at banks slipped -$6.4 bln in January from December, and household deposits retreated by almost -$1.2 bln as part of that. It's a seasonal dip. But year-on-year total customer deposits grew by +$36.0 bln or +10.0%. Household deposits were up +$17.9 bln or +9.7%.
HOUSEHOLDS BAIL FROM TDs
Household term deposits are still falling fast, declining by more than $2 bln in January alone, takingf the fall over the past year to -$12.9 bln and almost all of that since August. Meanwhile, household savings account balances rose almost +$800 mln in January from December to a recotd high $71.7 bln, and household transaction account balances held steady at a record $41.9 bln.
THE PACE PICKS UP
The pace of residential building completions in Auckland is off to a cracking start this year. The number of new homes being completed in the SuperCity has doubled over the last five years and is continuing to rise, exceeding +12,200 in the past twelve months. That alone accounts for a population rise of +33,000, although there is a substantial backlog to work through of course.
PRICED
Mercury (MCY) has advised that the yield on their $200 mln "Green Bond" is 2.16%, a margin of 0.85% per annum over the underlying swap rate. It has an investment grade rating of BBB+.
AN UNEXPECTED RETREAT
Australian retail turnover fell at a -1.1% in February from January in a surprise retreat. A rise of +0.4% was expected to build on the +0.3% rise in January, but that is not what they got. However on a year-on-year basis, February 2021 retail turnover was +8.7% higher than for February 2020. This will be the last of the 'fair' year-on-year comparisons for a while. (We will tend to compare with two years ago from now on.)
GUESSING THE SIZE OF THE BANK OF MUM & DAD
In Australia, the AFR is reporting that parents (the Bank of Mum & Dad) are lending, giving or underwriting record amounts for houses purchase deposits to help their adult children buy their first home. The claim is that the Bank of Mum and Dad is Australia’s ninth-biggest mortgage lender with a "loan book" of AU$34 bln (estimated from a sample). This support is now averaging more than AU$89,000, an increase from AU$74,000 in the past 12 months, and enough for a 20% deposit in most of the nation’s postcodes outside Melbourne and Sydney. The AFR quoted data is according to an analysis by researcher Digital Finance Analytics. (For perspective, Australia's largest home loan lender (CBA) has a loan book of AU$468 bln across both owner occupied and investment properties. The total market is AU$1.806 tln.)
GOLD RISES
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1751 and up +US$21 from where it closed yesterday. That is only marginally above where it closed in New York. But it is a +1.2% gain from the closing London fix.
EQUITIES GENERALLY LOWER
Wall Street fell away sharply at the end of its session today, down -1.5%. In Tokyo, they have opened down -0.9%. Hong Kong has opened down -1.3% and Shanghai has opened down -1.2%. The ASX200 is down -0.3% in early afternoon trade and heading for a weekly loss of -0.6%. The NZX50 Capital Index is heading for an unchanged result today and that will cap a week where it was up a minor +0.3%.
SWAP & BONDS RATES RISE
We don't have today's closing swap rates yet. If there are movements today, we will note them here later when we get the data. The 90 day bank bill rate is unchanged at 0.34%. The Australian Govt ten year benchmark rate is up +5 bps at 1.83%. The China Govt ten year bond is holding at 3.28%. The New Zealand Govt ten year is up +5 bps at 1.83% and still basically at the same level of the earlier RBNZ fixing at 1.84% (+5 bps). Although it got as high as 1.75% earlier, the US Govt ten year is currently up +7 bps from this time yesterday at 1.71%.
NZD SLIPS
The Kiwi dollar is now at 71.7 USc and a -¾c fall today. On the cross rates we are down to 92.5 AUc. Against the euro we down at 60.2 euro cents. That all means our TWI-5 is now down at 73.7.
BITCOIN DECLINES
Bitcoin has fallen to US$57,308 which is a fall of -3.0% since this time yesterday. Volatility over the past 24 hours has been a high +/- 3.3%.
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57 Comments
Yvil,
Unless depositors withdraw their money as cash (notes and coins) and squirrel it always, it has to end up back in the banking system. Total deposits have risen considerably over the last 12 months and this is a direct consequence of the Govt deficits and financing thereof with QE. There is now a lot more money floating around in the system which ends up as deposits and bank reserves.
KeithW
But you try and withdraw it as cash when everyone else is doing it and see how you get on. We effectively ran out of physical cash a year ago during the first lockdown. So as Keith says, funds are pretty much trapped within the banking system.
But if there is a whiff of a certain bank being wobbly then on-call accounts allow depositors to immediately take funds across to a "safer" bank.
Ipsos Mori research shows that 60% of NZers (67% in AK) now identify housing as the main area of concern for the nation. For a bit of context, that is the highest proportion ever recorded for housing and has doubled since the middle of last year. Housing has been the main concern ever since the Ipsos monitor was started in Feb 2018.
https://www.ipsos.com/en-nz/ipsos-nz-issues-monitor-february-2021
So got the call from our property manager this afternoon that the owner wants to move into their rental and we have 63 days to vacate. Have to admit this is the first time I have left a rental not on my own accord. We were hoping to wait till the end of the year to purchase our first home as my wife has recently returned from maternity leave and has started a new business. The ability for a landlord to evict you and your young family on such short notice certainly adds to the appeal of purchasing, doesn't it...
If you can get one ask for a 6 montth fixed term - all leases now convert from fixed term to periodic - unless BOTH the tenant and landlord agree to another fixed term lease. This will then enable you to still look for your own house at the end of the year and not have to worry about paying out the fixed term period. You will only need to give 28 days notice when you have bought your new house
Unfortunate news sorry to hear but at least an extra 21 days on the former notice period required. With great references you'll be snapped up anyway so would imagine you'll be in a strong position for your next property. Have you thought about requesting a long fixed term lease? A tenant of mine requested 5 years which we were both happy with at below market rent. Not saying you should rent for 5 more years but mine own a $M house they can make more from renting out and choose to rent somewhere they'd rather live. A crazy mixed up situation I know.
Albert
As you are a regular contributor to this site, I feel for you to hear of you receiving notice.
While there is much debate on this site regarding the economics of renting vs home ownership there are many intrinsic aspects also: receiving 63 days notice at a time not of your choosing is a considerable negative for renting. While the timing is not ideal, at least it was not at the time your wife was in the later stages of pregnancy which would have been even more inconvenient.
Not only is there the timing inconvenient with significant stress for you in having to find another property - which currently is not easy - there is the costs involved in shifting and usually due to rent increase drag, often the new property tends to be at current market rates and more expensive. For families with children it can mean new schools and them losing friends and having to establish new ones.
A disadvantage of having a property manager rather than dealing directly with the property owner is that the situation is more clinical and there is less empathy for you.
I wish you well and hope that it is not long before you are a homeowner with the financial and social security along with the intrinsic value of homeownership that goes with it. I have so often posted about this over the past three or four years and I don’t think that it has been fully appreciated by many.
I'm a dyed-in-the-wool tenant for over 45 years, and my comment is this has not happened often to me and it does sound like bad timing for Albert so sorry to hear about it.
I'm still really fearful of interest rate rises (I don't think our humble little govt will have much say in the matter for much longer), and if I were to be evicted there is no way I would pay $1m for a shitbox in the current environment, regardless of making myself feel a bit safer by fixing for a few years at 2% or whatever.
Had some friends move their whole multi-family clan to Brisbane recently - the numbers over there stacked up better than NZ.
There is a lot of luck in life.
just reading a Perth Now article on house prices in Perth. The top 5 price rises per suburb are as follows
1. Coodanup- up 29.8% this year to $305 000
2. Koondoola- up 21.4% to $320 000
3. Medina - up 20.5% to $235 000
4. Greenmount - up 19.3% to $479 000
5. Mount Nasura - up 18.8% to $475 000
All of these suburbs are within a 30 minute commute of the city centre. NZ FHB's with their 20% deposits saved already could buy 50-75% of a home in Perth. Housing affordability in Perth is a massive 3.0
having lived in Perth for 21 years - they have everything that NZ has but with much better weather. They even had the America's cup first and a more successful regatta - 13 odd challengers if I recall. And judging by last weekends landslide victory to the incumbent Labor party a leader that is even more popular than Queen Jacinda.
P.S unlike NZ labour - WA labor seems to get stuff done
Perth is a brilliant spot IMO. Warm, good metro city vibe, beaches, great parks, Swann rivers really nice, backs onto some nice mountain areas... if I didn't have the wife, I would be over there like a shot as I am suggesting to many young people.
It's also a short hop from there to lots of awesome Asian countries, lots of them on the same time zone even.
Cute throw away Zachary.
However, having actually lived there and as I suspect you're probably aware – it’s quite a nice spot.
Obviously, climate isn’t everything – but I do remember a line being something like “Perth has the climate Southern California thinks it has” – and to me that certainly was the case.
Could well be wrong – but turn off the immigration tap/laundering and I think current prices may well struggle here – and I imagine you’ve been around in NZ long enough to have previously witnessed this.
Nah, you mean it’s a free country, not a free market. In a free market risk would be accurately priced, savers would get a fair return on bank deposits, government subsidies would be removed, and the central bank wouldn’t be deliberately inflating asset prices to create a ‘wealth effect’. The central bank provides the environment for a bubble to exist, and the worker ants dutifully create one.
Last year $700K was the median in Papakura;
https://www.interest.co.nz/sites/default/files/hla/2020/january/Papakur…
I guess this report, when out this year will make for sick reading.
God help mum and dad too if prices do crash. I have friends that have worked hard (I mean actual physical work) to pay off their own house, but have then leveraged that to buy a rental and fund their children onto the ladder as it is being rapidly pulled up. A smart move if it all goes to plan. But they are now really exposed to future events they will have no control over.
If people want to speculate on tulips, bitcoin, Tesla shares etc, that's fine. They weren't forced into that gamble. But owning a home is a necessary part of good society and so shouldn't be a gamble where people are forced into either being winners or losers.
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