Bernard Hickey details the key news over the weekend in 90 seconds at 9 am in association with Bank of New Zealand, including news that Ireland's political scene went into full meltdown mode over the weekend.
This matters because Ireland's financial and political situation is at the heart of the European debt crisis.
Until now the Irish government and parliament have gone along with European demands to bail out the insolvent Irish banks and to embrace spending cuts to balance the budget.
However, Ireland's voters and taxpayers are starting to realise they are being forced to pay the price for bailing out Irish banks, and in turn, the British and German banks who lent them money.
This is widely seen as politically unsustainable and that is now hitting home.
Prime Minister Brian Cowen forced out a third of his cabinet last week and then over the weekend resigned as Fianna Fail party leader.
This prompted the Greens, who are in coalition with Fianna Fail, to resign from the coalition. This may force an early election (currently the election is scheduled for March 11) and endanger the passing through parliament of a budget bill crucial to the government's bailout deal with the rest of Europe.
Financial markets have yet to react, but this is expected to raise fears again about the sustainability of Europe's debt situation. This again could destabilise global financial markets and make it more difficult and expensive for our banks to borrow on international markets.
Meanwhile, Demographia has released its 7th annual survey of housing affordability in 325 housing markets in Canada, America, Ireland, Britain, Australia, New Zealand and Hong Kong.
It found (using data up until the end of the September quarter of last year that New Zealand's median multiple of house prices to income was 5.3, which Demographia says remains unaffordable.
Auckland's median multiple was 6.4, Christchurch was 6 and Wellington was 5.5. The multiple for Auckland Tauranga of 6.5 meant it was less affordable than Perth, San Diego and Edinburgh.
44 Comments
It is govt policy to support bank profits and bank security ahead of bothering about housing being seriously unaffordable. This week we will hear once again from Bollard that he believes keeping credit cheap will bring growth activity based on an increasing demand for debt...!
Meanwhile Kiwi peasant is learning all about being frugal and thrifty. The trend is becoming a cultural theme. The banks are screaming for more fools to take the bait and borrow the cheap loot. They worry that "lazy balance sheets" may become the norm.
On the retail side, sales are now permanent features. layoffs loom large. Govt gst revenue is in full retreat. English is borrowing $50 million a day to pay the bills. One of the bills is the finance on previous borrowings!
Kiwi households face rate rises double the 'official' rate of inflation. They will also be stung for higher insurance premiums. The cost of food is set to shoot higher for basics. Petrol and diesel will cost more. It all means they will have less to spend.
Stagflation....doh
Good on the Irish people, Globally you can t rely on the politicians who are in the banksters pockets to deal to the situation properly. You can imagine when the contagion hits france that the guillotines will come out
With housing afforability next to none, renting is becoming the next 'boom' as it seems. Just read an article at New Zealand Herald stating that there were not enough 'good' rental properties with some potential renters either offering more or renting houses they possibly cannot afford. With inflation on the rise, salaries remaining stagnant, what is a chap to do? If rentals are truly becoming unafforable, are we to move into mud-houses and possibly look at hunting in the savannah?
You have it...what better than a large old house to start with...divide the interior with temp walls to double the number of beds...then rent out the 'rooms'. A bog standard high ceiling 4 br job can easily be converted to sleep ten adults and a garage will up that to 14.
Pick a place with lots of roof space and with some deft woodwork you get a couple of beds in a loft. A tent in the backyard will sleep a heap of sprogs.
Say $50 a week for a room and you have $700 a week minimum...that's cash of course...$35000 a year.
Before you know it the invite to join the National Perty will be in the post.
Woops...forgot the underfloor space...best to buy where the ground is dry and dig away to make it pay.
The NZ Herald is just another paid advertiser for the REINZ. Anything you read in this rag regarding the property market is just paid propaganda.
We call it BS Andy...Herald BS...HBS!
The good properties may well be in demand for rent....the biggest rental market segment is the bottom end...that doesnt sound so hot and seems competitive at least in Wgtn..
regards
@ Overworkedmonkey..don't read too much into the NZ Herald on the renting crisis...there is always an undersupply at this time of year..mainly because of students scrambling to find rentals before the first term begins...it's a fact...I've managed 100's of rental properties (as used to be a property manager) and it is always busy this time of year...I bet if you look at NZ Herald articles over prior years (for this time of year) you will see similar reports of a rental squeeze going on...How about the link below from 2002:
http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=888457
Reading the Herald, there are highly paid, double income professionals in Auckland who don't consider other than renting quality places because that's their 'self-image' ( like keeping up appearances?) and they are prepared to pay for them come what may . We used to call them yuppies.
Seriously, LOL at being more expensive than New York, whoever is buying now is a chump, because they are buying at the TOP of the market, not the bottom as they think. Nice one guys keep it up.
Wouldn't consider purchasing a property quite yet. I agree that it's still highly disapportionately valued. Will wait it out when there's a crash or a burst in the bubble which I still believe is looming especially with rising commodity and fuel prices. The question however is what to do with all the cash horded away at the bank which earns you a measly rate of interest? Also there seems to be less information available about how the retail deposit guarantee scheme works. No one I know seems to know what it is nor how it works.
But a bank deposit is as risk free as you can get........and the great thing about deposits is it gives your cash utility.....the ability to jump at a bargin...
I agree with a crash....it has to go back to 3:1....the diference here is unlike the US which shed jobs in this recession NZ businesses held on waiting for the upturn....so when that doesnt arrive and in fact we dip our un-employment shoots up and the property ponzi scheme goes gaa gaa.....that will hurt us though....so I wonder if even at 3:1 what the average wage will do....
regards
I would only consider it risk free assuming the financial institute does not crash. Also with Australia increasing the OCR, the current interest rate being offered with the big 4 is around 6% compared to the low figure of 5.2% here and depending on your tax rate, you would be earning between $1600 - $2200 on a deposit of 100K.
Thursday folks...you know what's coming down the track...here's a preview.....
Thursday, January 28th 2010, 9:01AM(delete...insert Thursday January 27th, 9:01 am)
Reserve Bank Governor Alan Bollard said: "The outlook for the New Zealand economy remains consistent with the projections underlying the December Monetary Policy Statement.
"Global activity continues to recover, helping push New Zealand's export commodity prices higher. Economic growth is most apparent in China, Australia, and emerging Asia. However, sustained growth throughout our trading partners is not assured, with many still facing impaired financial sectors and overall activity still reliant on policy support.
"Similarly, the New Zealand economy continues to recover. Policy stimulus and improving export earnings have seen a pickup in household spending. That said, households remain cautious, with credit growth subdued. Business spending remains weak.
"Annual CPI inflation is currently at the centre of the target band, and is expected to track comfortably within the band over the medium term.
"The economy is being assisted by both monetary and fiscal policy support. As growth becomes self sustaining, fiscal consolidation would help reduce the work that monetary policy might otherwise need to do.
"If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.(delete insert middle of 2011)
A few questions for Hugh about that housing affordability survey:
a) Are we comparing like for like properties? Can you buy a detached 3 bdr house in New York for 6.1 times the annual income? Or is it a tiny 2 bdr apartment?
b) If New York is cheaper than Auckland, wouldn't that imply that land supply is not the reason Auckland is so expensive - surely there is a much more limited supply of land in New York than the artificial limits you are so against in Auckland?
c) If houses were 3x the median income (about $100k for a house) as we are led to believe they should be, wouldn't we have a whole lot of Chinese buying them up. It would definitely seem like a bargain! I could afford to buy one every couple of years too.
Heres another question for Hugh ,
What stats are using for your Auckland medium household income
Is it only wage and salery earners
Does it include income across all sources , investment incomes , the self employed
Does it include welfare payments
70k household income for Auckland sounds pretty low for the ammount of high proffesional incomes . 70k is close to the average auckland income
There are a lot of un-skilled and semi-skilled who earn far less....
regards
Another thing is that most families have a set of fixed costs (food, power, etc) which are pretty much the same wherever you live in the country. So if you earn 45k in a small city and have 30k in costs, you only have 15k a year to put towards your mortgage. But if you live in Auckland and earn 70k, you would have 40k a year to put towards your mortgage. So using the ratio of income to house price is somewhat flawed - the places where people earn less always come out as being more affordable, but that might not really be the case. In the US Detroit has one of the most affordable housing markets - does that make Detroit a great place to live?
Chill.... a new graphic to play with Legatum Prosperity Index
We're up there just behind the Scandinavians and our colonial masters.
Education.....1...?!
Jesus they are saying we have good governance. There is no hope for us.
And the US is ranked No 1 in health! What's that? - No. 1 for the 1/4 of the population that has comprehensive health insurance?
Good on the Irish. They understand what the US taxpayer didnt
The bailout plans are all about protecting the wealth of a privileged few(who have already ripped us) by "legalized theft"
Just when you thought people were begining to see the light...
http://msn.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10701624
But we didn't want to keep renting. That's dead money. ...
They are going to find out about dead money real soon, perhaps they might become familiar with the term negative equity also.
I think they will be renting again sooner than they think. although some on here won't think so.
so what do you think will happen , a broad statistic says there house should be worth less so they decide to sell for a loss and go back renting
or do they keep on paying the mortgage like everyone else and there life goes on as normal
Shock horror , Obviously they didnt find there first house seriously unfordable so must earn more then $15.50 packing shelves ?
A fool and their future freedom are soon separated......I expect this article is really part of the spin and BS programme aimed to pork the market Dogma.
How is that news - wow a couple paid more for their house than they first thought!!
LOL scarfie.
Yes wolly and Jimbo this isn't really a news story, its something else, there is an agenda behind it im sure of that.
wait till the interest rates start rising, that 30 years could become a bit longer.
Article sounds like an OLLYN con-job.
Wait until their interest rate rises 2% as NZ becomes more of a risk.
and can I ask?
Where are all the TVNZ sponsored OLLYN type shows at present?
Yeah and they turned down my idea to run a tv series on alternative homes. I figured there was enough great material for many weeks. Living on boats, in buses, tents, containers, coverting sheds, hiding out in hay stacks, dune living, plastic bush homes and many others....
Wol,wait until the bank deposit guarentee ends December,banks are gonna have the trots!
Which banks are offering the guarantee? Believe BNZ doesn't offer it. Also what guarantees are in place should the banks fail? Apart from hiding monies under the bed, between the sheets and pillow cases, it seems no one can be trusted....
Are some of you guys competing to be chicken licken??
Chicken Little wasn't wrong about being aliens visiting the planet. Maybe we should pay heed rather than listening to those calling wolf instead.
some good ideas Wolly. They could just run a program interviewing people they had on in the 06-08 hype and update how they are doing now. With rent arears, rate hikes, rental decreases, p labs, tribunal decisions, decreasing MV's etc.Lots of material.
This is where Mole has it over us RJ....no red tape for Mr Mole...when he wants a home he digs a hole.
Good , let the Irish default .
My feeling is its the only way to clear up this mess for once and for all .
The consequences may be dire in the short term , but its all part of the Laissez Faire free market capitalist system which always re-generates itself , and needs to go through these ebbs and flows .
Quite right Boatman..let the Irish go first ..that way the losses at the banks will be default of the Irish!
Didn't realise that chicken licken is chicken little in America. Yes siree, I'm withall those here who think the sky is going to fall in during 2011, ain't that the truth ruth.
That's rubbish, the sun will be out each and every day and we won't see things half as bad as the half-wits who go around saying,'listen to me,the sky is going to fall in' and generally glorifying on blogs in being attention-seeking drama queens. Time will of course tell.
Muzza - wrong quote. Try: Truth will out.
Yes, that's the one
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