What happened Friday

A review of things you need to know before you go home on Friday; lifestyle block sales surge, term deposit balances drop hard again, Auckland new home building picks up, swaps rise, NZD falls, & more

19th Mar 21, 3:59pm by David Chaston

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%.

This soil moisture chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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57 Comments

by Audaxes | 19th Mar 21, 4:13pm 1616123605

Bank lending to housing rose from $50,788 million (48.36% of total lending) as of Jun 1998 to $298,830 million (60.22%) of total lending) as of January 2021 - source.

GDP qualifying business lending was down 3.7% annually.

by fortunr | 19th Mar 21, 4:18pm 1616123912

"Household term deposits are still falling fast, declining by more than $2 bln in January alone".
A $2 bln per month fall in term deposits is just the beginning. I expect that this process will continue and intensify.

by Yvil | 19th Mar 21, 4:46pm 1616125590

Having so much deposits "on-call" could lead to disaster if things go downhill and there's a rush of people drawing down their money at the same time

by Justa comment | 19th Mar 21, 7:15pm 1616134533

True, thats why previous responsible, balanced, RBNZ governors required banks to hold safe levels of TDs including at the long end, unlike the current cowboys.

by Uninterested | 19th Mar 21, 8:19pm 1616138368

Which would happen if there was another big EQ for example.

by keithwoodford | 19th Mar 21, 9:37pm 1616143060

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

by Justa comment | 19th Mar 21, 9:49pm 1616143761

Except that the deposits are on call immediately versus TDs up to 5 years.

by Beanie | 20th Mar 21, 9:03am 1616184210

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.

by Audaxes | 19th Mar 21, 4:26pm 1616124360

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.

Collective bank balance sheets contracted $10.085 billion over the same period - Link

by Uninterested | 19th Mar 21, 8:21pm 1616138468

But one assumes that kiwisaver cash accounts would in a large part be TDs with banks.

by keithwoodford | 19th Mar 21, 9:28pm 1616142512

Audaxes,
Assets ad liabilities both declined. Equity actually increased slightly
KeithW

by J.C. | 19th Mar 21, 4:27pm 1616124429

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

by Uninterested | 19th Mar 21, 8:22pm 1616138548

I think its woke-ness/ PC-ness.

by Albert2020 | 19th Mar 21, 4:40pm 1616125224

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...

by Yvil | 19th Mar 21, 4:48pm 1616125682

It sure does, sorry to hear about your conundrum. If it really doesn't suit you, try talking to them, everything is up for negotiation

by Believer1980 | 19th Mar 21, 4:48pm 1616125706

I agree. It should be 90 days and the landlord should pay the moving costs done by a professional to a reasonable price.

by stevell | 19th Mar 21, 5:31pm 1616128275

What is your logic around landlords paying for moving costs?

by ikimpaul | 19th Mar 21, 4:49pm 1616125764

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

by Brock Landers | 19th Mar 21, 10:57pm 1616147823

Good luck with that. Nobody wants to know about anything other than a full year.

by Theoracle | 19th Mar 21, 5:14pm 1616127281

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.

by printer8 | 19th Mar 21, 5:56pm 1616129794

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.

by Comyn | 19th Mar 21, 7:05pm 1616133925

It's not your house though? The landlord most likely has is own problems (money, sickness or loved ones) and family to look after. They have every right to take it back. It's a tough situation however we all have been through it.

by Nzdan | 19th Mar 21, 8:14pm 1616138048

Technically sure it is the landlord's property. It's a shame residential tenancies aren't treated more like commercial leases in NZ.

by Albert2020 | 20th Mar 21, 9:38am 1616186315

Yea well aware it’s the landlords house. I’m not debating that and their right to move in. We wanted the flexibility of a periodic lease in case we were in a more fortunate position to buy earlier but obviously it goes both ways.

by Flying high | 19th Mar 21, 8:03pm 1616137389

Tough gig.... any died in the wool tenants care to comment?

by Rob Reid | 19th Mar 21, 9:13pm 1616141617

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.

by Kate | 19th Mar 21, 8:58pm 1616140730

I wonder what evidence property managers require in terms of the owners plans to move in? The difference between 63 and 90 days is significant for the renter. I hope it all goes well for you.

by Albert2020 | 19th Mar 21, 9:20pm 1616142049

Yes will have to take them on their word, but will certainly keep an eye out to see if it is quickly put up for sale.

by Fritz | 19th Mar 21, 10:57pm 1616147826

Are you in Auckland? There are some good Kiwibuild options around at the moment if you are open to living in a townhouse or apartment. They are ballots though, so bit of a lottery.

by Albert2020 | 20th Mar 21, 9:34am 1616186093

Yeah, but pretty sure we would be ineligible due to the low income caps.

by Fritz | 20th Mar 21, 10:08am 1616188103

Low? 180k in the 12 months prior to buying

by Flying high | 20th Mar 21, 11:03am 1616191384

You are on a high income... we were on low incomes when we bought and no help from family

by Yvil | 19th Mar 21, 4:41pm 1616125285

"The AFR quoted data is according to an analysis by researcher Digital Finance Analytics"

Disappointing that Interest quotes data from such a one-eyed source as DFS

by J.C. | 19th Mar 21, 5:24pm 1616127897

DFA is great. Independent research with a robust methodology.

by Yvil | 19th Mar 21, 8:04pm 1616137472

LOL, I finally know what you do for a living, comedian

by Flying high | 19th Mar 21, 8:07pm 1616137629

I prefer Michael Yardney of Metropole to Martin North DFA.. have learnt a lot from michael and he accurately forecast the current strong market in oz

by Fritz | 19th Mar 21, 11:17pm 1616149035

So would you be comfortable with quotes from Oneroof, A Church or T Alexander? Because they are all one eyed.

by Yvil | 20th Mar 21, 12:20pm 1616196031

I'm comfortable with Tony Alexander's view because he has a track record of mostly correct predictions whereas Martin North has been warning about the property demise for many years and he has been so wrong for so long

by Fritz | 20th Mar 21, 1:25pm 1616199918

Fair enough. Better to talk then of 'accuracy' rather than one eyed. Tony A is very one eyed.

by ikimpaul | 19th Mar 21, 4:57pm 1616126273

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

by Zachary Smith | 19th Mar 21, 4:59pm 1616126381

Siberia is nice too I hear.

by ikimpaul | 19th Mar 21, 5:10pm 1616127011

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

by taimaiakka0 | 19th Mar 21, 5:32pm 1616128365

Now Queen is more popular overseas as srands exposed in NZ.

Overseas as media...... Soon.......

by Fritz | 19th Mar 21, 11:06pm 1616148371

Nice city, and good access to Asia

by blobbles | 19th Mar 21, 5:15pm 1616127300

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.

by Uninterested | 19th Mar 21, 8:27pm 1616138878

"...if I din't have a wife..." Haha. Let us all dream....
For me I'd be out of Goff county in a shot!!!!

by custard | 19th Mar 21, 6:14pm 1616130850

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.

by Zachary Smith | 19th Mar 21, 10:43pm 1616147000

It was written in jest and like all good jests perhaps a tiny kernel of truth. People have often trashed Auckland and NZ in general in the comments, especially that reprobate Malarkey, no one seemed to mind.

by Fluffybunny | 19th Mar 21, 6:19pm 1616131149

Rubbish comment

by Independent_Observer | 19th Mar 21, 7:16pm 1616134605

I've spent quite a bit of time in Perth - its a fantastic spot.

by Burni | 19th Mar 21, 6:45pm 1616132751

Because of COVID those kiwis who want to move to OZ have bigger hurdles to getting there.

by Justa comment | 19th Mar 21, 7:20pm 1616134801

yes the Auck median is way higher than Perth, Melbourne, Sydney and Brisbane. But its a free market, if people want to pay 1.1 million for a weatherboard house in Papakura or the like thats their choice, even if its really worth 700k.

by Tom Valen | 19th Mar 21, 7:59pm 1616137161

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.

by Justa comment | 19th Mar 21, 7:41pm 1616136096

True

by Kate | 19th Mar 21, 9:08pm 1616141313

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.

by Fritz | 19th Mar 21, 11:19pm 1616149150

Re: bank of mum and dad- so there you go, perpetuation of inequality.
Middle income earners with poor parents have almost no chance.

by Beanie | 20th Mar 21, 9:01am 1616184098

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.