Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
HSBC cut its one year fixed Premier rate to 2.09%, and raised all fixed rate for 2 year and longer. More here. Nelson Building Society (NBS) also cut its one year fixed rate.
TERM DEPOSIT RATE CHANGES
Rabobank raised most rates for term deposit terms of 15 months and longer. Christian Savings also made changes.
MOMENTUM BUILDING
The building industry is powering on with 43,466 new dwellings consented in the May year, up more than +15% from the same period a year ago. More home units and townhouses are being consented but the number of apartments being consented has taken a dip.
MOMENTUM SLOWING
Although the average value of all New Zealand homes tops $900,000 for the first time, CoreLogic says average house values is now slowly losing steam.
UNEXPECTED RESULTS
Surging tax collections and spending plans that haven't yet gained any momentum are resulting in enormous changes in the Crown Accounts results.
-15% SMALLER, RULE CHANGE
ANZ is reducing the apartment size at which it will require customers to have a higher deposit. Under its new rules, customers only need a 20% deposit for freehold, standard apartments that are 38 m2 or larger. Also a standard apartment must have a bedroom separate from the living area. Previously, any apartments smaller than 45 m2 required a 50% deposit.
PRICES UP ON COST RISES, EMPLOYMENT CUT BACK
68% of Retail NZ members are expecting prices to rise over the next quarter on the back of increased costs. 54% of them cut back on hiring or conditions following the rise in the minimum wage, according to the Retail Radar Report.
YIELDS RISE, MOSTLY
Treasury offered $500 mln in three separate bond issues today. The May 2024 $100 mln attracted $380 mln in bids and the average yield was 0.74% pa, up from 0.55% pa just two weeks ago. The May 2028 $100 mln attracted $410 bln in bids with a yield of 1.54% and up from 1.43% two weeks ago. The April 2037 $100 mln attracted $254 mln in bids but this had a yield of 2.29% pa which was -5 bps less than the prior tender two weeks ago.
NO GOOD OPTIONS
The RBNZ is calling on New Zealand banks to "show courage" and keep their banking services in the small island nations of the South Pacific - even in the face of tough and expensive regulatory requirements for AML/CFT. The options are tough for everyone concerned.
CHINA GROWTH WANING
In China, the Caixin PMI dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of price pressures, even as supply shortages continue to constrain output. This was a larger decline than the fall in the official survey released yesterday. The average of the two continues to point to a timid expansion in industry, now at its lowest since February.
AUSSIE TRADE SURPLUS SWELLS
Australia's trade balance for both goods and services was AU$9.8 bln in May and has been in surplus for 41 consecutive months, from the start of 2018. The annual surplus has swelled from +AU$23 bln for 2018 to +AU$74 bln for 2020 - with rising commodity prices the key driver of the improvement. Their trade surplus is expected to widen further in Q2 2021 on still higher commodity prices.
BAH! YOU CALL THAT A BIG RISE?
Australian dwelling values rose +1.9% in June from May, taking annual growth to +13.5%. This was led by houses, which rose +15.6% over the year, compared to a +6.8% lift in unit values. (For the year to June, New Zealand dwelling values rose +22.8%.)
GOLD FIRM
Compared to this time yesterday, the gold price is up +US$6/oz to US$1770/oz in early Asian trading.
EQUITY MARKETS MARKING TIME
The S&P500 ended its Tuesday session flat. The very large Tokyo equity market has given up some yearly gains in mid-morning trade to be flat. Hong Kong has opened flat too while Shanghai is up +0.3% in early trade there. The ASX200 is up +0.6% in early afternoon trade, while the NZX50 Capital Index is flat in late trade.
SWAP & BONDS STILL TRACKING SIDEWAYS
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They are probably unchanged. The 90 day bank bill rate is up +1 bp at 0.36%. The Australian Govt ten year benchmark rate is down -1 bp at just under 1.49%. The China Govt ten year bond is down -1 bp at 3.10%. The New Zealand Govt ten year is unchanged at 1.79% and above the earlier RBNZ fix of 1.77% (unchanged). The US Govt ten year is down -1 bp at 1.47%.
NZ DOLLAR STABLE
The Kiwi dollar has slipping slightly, now at 69.8 USc. Against the Aussie we are firm at 93.3 AUc. Against the euro we are marginally firmer too at 59 euro cents. That means the TWI-5 is unchanged at 72.6.
BITCOIN SOFT
The bitcoin price is now at US$34,912 and down-2.3% from where we were at this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.7%.
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59 Comments
C/o Stuff:
House prices nationally are now 12.4 times the average wage due to a drop in home affordability in recent months, new Massey University analysis reveals.
Please, someone tell us all about the brief period where interest rates were 22% and how that's worse that this, and how your perception of how hard you had it trumps objective economic statistics.
Our first mortgage on our first house was actually a little lower at 20.5%. After saving for 4 years for a deposit of 30%.
This took one entire wage to pay. While we lived on the other.
Lived in a shell, while finishing the kitset house.
Its all relative, every time period has its barriers - its always possible to find a way to home ownership if you save, sacrifice & look for alternatives.
People don't live in or by statistics, they seek opportunities - formulas about wages/houses are meaningless.
Hear hear. I have finally escaped the hell hole of the pacific. A commenter on here a while back said a comment to the effect of "a weight lifted off my shoulders when leaving NZ" and I can say my experience is the same.
Interestingly, talking to people this week lead me to dig up the stats on the average wage difference between NZ and Australia, from their own statistics websites. Average wage difference is 173% just for moving countries to Aus. What a deal! Did someone say easier work for more pay?! And cheaper housing? And $1 avocados at the super market in Winter?!
It is in young peoples best interest to protest or leave the boomers to their Gormenghast.
Another (young) academic signing out of NZ.
And where is your maths?
Stats NZ average wage (June 2020) $55,120 NZD.
Stats Aus average wage (November 2020) $89,003.2 AUD.
Exchange rate used; 0.931.
So looking in NZD, Aus average wage is $95,599.57 NZD.
Difference is $40,479.57 NZD.
Now if you divide $95,599.57 by $55,120 = 1.7344.
Multiply by 100 and you get 173.44%.
What B$ are you trying to peddel?
From the Australian Taxation Office:
https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxa…
Table 3: Individuals – median and average key items
Average taxable income ($) 62,549
Median taxable income ($) 47,492
Front page of the ABS, average adult wage Nov 2020, $1,711 AUD weekly, multiply by 52 gives my figure.
The average hasn't gone up 42% in 2 years. The numbers are different because they're different data sets.
If you're comparing Australian "Average Weekly Earnings", "for full-time adults" then you should use the same data for NZ.
Those NZ numbers are for "Median Earnings", include part-time work, and not only adults.
Prerogative?
I just don't like sensationalist comments based on incorrect data.
I think the relationship between house prices and wages is only for general journalists. The real relationships that matter are a) the ability to save a deposit from household incomes, and b) the ability to pay the mortgage from incomes. The first one is a growing problem but because the FHBs are taking an increasing share of all home loan transactions it clearly isn't a killer problem yet. The second one is a serviceability measure, and that has never been easier according to the RBNZ data on that.
Hardly anyone saves up the full purchase price of a house and then makes a debt-free purchase. And that has never happened, ever (unless you are uber-wealthy). So why some people are obsessed about the price-to-income relationship beats me. Houses have never been 'affordable' on that basis. Real people save a deposit, then use their income to make home loan payments. Those are the metrics we should follow.
Because the end goal of home ownership is to own 100% of your house, so you have more expendable income and a break from your home ownership status being wholly dependent on you being able to bring home a good income every week. The higher the house price, the less of your life you get to enjoy as a 100% home owner.
Nope, low house price and high interest rate (which other than somehow having a significant oversupply of houses is the only way you will get low prices) just means it takes you the same amount of time to pay down a much smaller amount of principal.. A 30 year mortgage is still a 30 year mortgage regardless of how much of the weekly payment is going to principal and how much to interest.
Mortgage rates have dropped over time meaning people historically didn't actually take 30 years to pay it off, as the principle was quickly paid off when lower rates kicked in. Buying now means you are betting huge real sums of future income on interest rates not rising in 30 years from the lowest 'crisis' levels they have ever been set at. Even if the rates did drop to zero you still have the huge principle to pay off that is not going anywhere. This idea that things aren't that bad now is ridiculous.
Sure, but when they signed up for it they didn't know rates were going to drop, they got lucky. Same now, we don't know which way rates are going to go, but the idea they can only go up rapidly is bollocks, if they do, (unless they are accompanied by large wage inflation) the economy will crash, and in comes the RBNZ & Govt to give the economy another dose of stimulus, i.e smash the rates back down. Interest rates are going to stay low unless wage inflation is allowed to run. Either way the real cost of servicing a normal mortgage are going to be pretty much on par with paying rent.
"the real cost of servicing a normal mortgage are going to be pretty much on par with paying rent" is not right. For several years now I've been paying considerably less rent than servicing a mortgage on a similar house, and I didn't blow a big deposit on top of that.
Interest costs on a $800k mortgage are under $400/week, bet your dead money rent is higher than that. I consider the principal part of the payment is more savings than an expense, but sure the upfront $ you pay weekly might be lower, but doubtful by much. The last place we rented was back on trademe last month, rent was up $50/week from when we were there, so now $630/week. Our mortgage refixes next week, and if we had gone for minimum payments we'd be paying $600/week on the mortgage.
And of course in max 30 years (we're aiming for
Sure, and the home owner gets to keep the asset price appreciation, gets to choose their own carpet, wall paper and pets. We'll see in a decade whether you wasted a decade paying someone else mortgage off or your own. Median Auckland rent for a 3 bedroom house in a decade. I'll take a guess at $950/week.
Your serviceability argument would hold true if we had 30 year interest terms like the USA but we don’t and as such there is a very real risk of these FHBs who have taken on huge debt being subject to higher rates from historical lows. That is why house to income ratios are important. Let’s also look at the figures of gifted money from parents to get a real idea as to how easy FHBs are finding that deposit accrual also shall we?
Hardly? Two thirds of households don't have mortgages according to the RBNZ back in 2019.
The already wealthy are the main participants in the current residential bank mortgage market - current low and falling borrowing costs confirm as much. The return of the money must be more important than the return on it.
Friends of the family in their eighties rent out their 4 bedroom family home. Use that rent to pay the mortgage on a two bedroom 70s ownership flat thingy they then bought to live in. Never owned any property other than their home before and took this action only because their income from TDs etc plummeted. Actually they are now quite happy and with a much more friendly household budget than before. QED.
Auckland median dwelling price outpaces Sydney, (1148000/ 994000) as economists in Australia see no rate rises until at least 2023 or 2024 to encourage further price increases.
https://theconversation.com/economy-will-be-weak-and-in-need-of-support…
Treasury offered $500 mln in three separate bond issues today. The May 2024 $100 mln attracted $380 mln in bids and the average yield was 0.74% pa, up from 0.55% pa just two weeks ago. The May 2028 $100 mln attracted $410 bln in bids with a yield of 1.54% and up from 1.43% two weeks ago. The April 2037 $100 mln attracted $254 mln in bids but this had a yield of 2.29% pa which was -5 bps less than the prior tender two weeks ago.
When a governments actions have nothing to do with that governments policy.
In Monty Python speak Willie is arguing in his spare time.
https://youtu.be/xpAvcGcEc0k
Probably not the 5 minute one.
If its not government business, who is he working for. Who is paying the bills?
https://www.rnz.co.nz/news/te-manu-korihi/445959/next-steps-to-meeting-…
Māori Development Minister Willie Jackson has been reluctant to comment on He Puapua, saying it is "separate to government policy".
He has today announced at Ngā Whare Waatea Marae in South Auckland the next step in developing a national plan to implement the declaration will be consulting with "Māori stakeholders".
Over the next few months, Jackson said he would be working with representatives of the National Iwi Chairs Forum.
"This declaration is about indigenous peoples so it makes sense we talk with Māori first up," Jackson said.
Here's a good article explaining what I have said for more than a year, the new zoning on it's way will push property prices higher again:
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