What happened Thursday

A review of things you need to know before you go home on Thursday; FMA warning, massive housing value surge, another housing Accord, expanding dairying, sharp falls in swap rates and the NZD

23rd Oct 14, 4:00pm by David Chaston

For Thursday, October 23, 2014. <a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
There were no changes today.

TODAY'S DEPOSIT RATE CHANGES
There were no changes today.

FMA WARNING
The Financial Markets Authority is warning consumers and investors to be wary of cold-calls asking them to buy shares or put their money into offshore firms.

THE AUCKLAND HOUSE VALUE SURGE
Auckland Council has now received the 2014 General Revaluation report, which shows average residential capital value increases of 34.8% since 2011 (the last revaluation). It also shows increases of 16.2% for commercial property; 15.7% for industrial; 17.7% for lifestyle and 4.6% for rural property. The new values for individual properties will be published online on November 10, 2014

THE MASSIVE SCALE OF THE PROPERTY DISTORTION
The value of our residential housing stock rose +$3.6 bln per month in the three months to June 2014, according to data out today from the RBNZ. That makes it a +$46.8 bln rise in the twelve months to June. There will be little else in the economy showing such dollar growth. That said, it is well down on the +$66 bln growth in values in the year to September 2013. All up, our housing is worth $735.6 bln at June 2014 in this PropertyIQ data.

ANOTHER HOUSING ACCORD
A Queenstown Lakes Housing Accord has been signed between the Government and the local Council to provide an additional 1,300 homes over the next three years.

MORE DAIRYING IN SOUTH CANTERBURY
Fonterra has started the consultation process ahead of lodging consent applications to build two new high-efficiency milk powder driers at its Studholme site in South Canterbury. The proposed investment would bring a significant boost to milk processing in South Canterbury – one of New Zealand’s fastest growing dairy regions – with around 9 million litres of additional capacity to help keep pace with rising milk volumes.

NO PRICE PRESSURE
Inflation in the September quarter was low, held down by the tradeables sector. CPI up just 0.3% in the quarter and 1.0% for the year; well below economists' forecasts. The NZ dollar fell on the news because the market now sees the OCR firmly on hold until September 2015. The data does not include the coming drop in fuel costs. And if the dollar stays lower it may bring some tradeable inflation back into play in future surveys.

CHINA FACTORIES STILL EXPANDING

The October flash China PMI was out a few minutes ago and that cam in slightly above expectations at 50.4 (50.2 was expected). That is a 3 month high. New orders and new export orders grew, but at a slower rate.

WHOLESALE RATES
Domestic swap rates fell sharply today, down -6 bps across the curve. The low CPI data drove the response. The 90 day bank bill rate was unchanged to 3.68%.

OUR CURRENCY HOLDS
Check our real-time charts here. The low CPI data also undermined the currency, which fell first when the data was released, then further on the China PMI data. It is now at 78.4 USc, which is almost a 1½c drop, down against the Aussie to 89.5 AUc which is a similar drop. The TWI sits at 77.5

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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12 Comments

by Henry_Tull | 23rd Oct 14, 4:23pm 1414034604

milk-wise: where might the long run farmgate price be..

from the USA:

Milk producers may have to wait until 2016 to see a revival in prices, US farm officials said, forecasting continued rises in output from New Zealand, the top exporting country, despite lower values.

"The good times for dairy farmers have gone away," the US Department of Agriculture bureau in Wellington, New Zealand said, highlighting the drop in expectations for returns for the country's producers.

..lower prices are "unlikely" to depress New Zealand milk production in calendar 2014..

http://www.agrimoney.com/news/milk-producers-may-have-to-wait-for-price-recovery--7631.html

and

looking at crops, crop prices move in the same direction as population and in the opposite direction as productivity...

This report explores the potential for global agricultural production to 2050, using a model-based analysis that incorporates the key drivers of agricultural production: population, per capita income, and changes in agricultural productivity.

http://www.ers.usda.gov/publications/err-economic-research-report/err174.aspx#.VEhlbvmUc4k

the Eurpoeans via the MMO have already mentioned their wish to see a supply reaction.

by cowboy | 23rd Oct 14, 9:44pm 1414053892

" crop prices move in the same direction as population and in the opposite direction as productivity..."

? wow... demand increases prices, over supply decreases prices.... who would have guessed? How much did they pay that person to write the report?

and yes, despite a flooded market, Fonterra is still increasing supply like there is no tomorrow (and cutting headcount, guillotining brands to make ends meet..... just as well they're chasing the highly sensitive, extremely competitive Chinese Baby Formula market - using local Chinese suppliers... because we all know how much the chinese trust local brands)

by Henry_Tull | 24th Oct 14, 9:22am 1414095723

not to forget the green and goldies ground work

Milk price was important to Fonterra's 1300 milk suppliers but profitability was more important, she said.

"We've done a lot of homework with our farmers and the Bonlac Supply Company (the farmer-owned co-operative contracted to source Fonterra's milk needs) - we wanted to make sure they got the best milk price and could make the best milk production decisions based on capacity and profit goals," Ms Swales said.

"We all need the Australian milk pool to grow. "By 2020 the world is expected to have a 100b litre a year gap between supply and demand for milk products. "Australia only produces 10b litres - there's great potential for us out there."

http://www.farmonline.com.au/news/agriculture/agribusiness/general-news/fonterra-courts-suppliers/2701491.aspx?storypage=0

by iconoclast | 23rd Oct 14, 8:07pm 1414048070

The land bankers are hurting

For the last 5 years we have been constantly told it's all the fault of the land bankers

From the above it can be can seen

Auckland capital value increases since the last revaluation in 2011

residential +34.8% (11.0% pa)

commercial property +16.2%

industrial +15.7%

lifestyle blocks +17.7%

rural land +4.6% (1.4% pa)

by Kumbel | 23rd Oct 14, 8:49pm 1414050589

Land bankers are a symptom not a cause. These data graphically show you what effect drawing lines on maps has on property values.

by iconoclast | 23rd Oct 14, 9:55pm 1414054520

You will notice that the value of vacant land inside urban boundaries is not provided

Funny that

by Kumbel | 24th Oct 14, 6:40pm 1414129235

Council valuations are quick and dirty. They exist solely to calculate the incidence of rates on individual properties - they only have to be relatively right.

The valuer gets a dump of the council's property database, does some indicative valuations, extrapolates the results over the whole dataset and sends it back in.

If the council is not particular about recording land use/building type in their database then the valuations certainly won't add anything new.

Most likely these analyses are based on zoning not specific land uses.

by cowboy | 23rd Oct 14, 9:40pm 1414053625

from article: "The value of our residential housing stock rose +$3.6 bln per month in the three months to June 2014, according to data out today from the RBNZ. That makes it a +$46.8 bln rise in the twelve months to June. "

Well all that increase in "value" must be Auckland and Christchurch. Nowhere else is moving up.

by iconoclast | 23rd Oct 14, 9:56pm 1414054571

Indeed

The pressures driving prices in Auckland and Christchurch are different. Not the same.

They are quite distinct, unique, and identifiable

That they are out of control is unquestioned - and nothing will be done about it

by scarfie | 23rd Oct 14, 9:30pm 1414053018

A useful, perhaps informative, piece from George Friedman.

http://www.stratfor.com/weekly/similarities-between-germany-and-china#a…

by Brendon | 23rd Oct 14, 10:32pm 1414056739

Why are we still stating that Housing Accords will provide x number of houses in y number of years when we know they don't do that.

All Housing Accords are is a marginal increase in zoning that have had no impact on residential land prices.

by Alter Ego | 24th Oct 14, 9:20am 1414095607

Not the Thursday gossip, but the Friday funny.

Funny how some receive charity, but do not dispense it, except in large sums to each other, nor pay tax on it.

http://www.nzcpr.com/the-failure-of-ngai-tahu-holdings-corporation-as-a…

Now, where can I get my Charity registered?, because as far as I am now concerned, charity must begin at home.

I want to join the 24 thousand plus entities endowed with helping each other, out of the main stream medias view, with as little as possible dribbling down to the people they are supposed to aid.

(It is not small business after all, so why are they totally exempt, but our small savings are not)

In fact, I met some people paid to door knock, house to house, to maintain the coffers, over and above their current expectations.

In fact on Sundays there are even more businesses penny pinching in the name of charity, but I never realised quite so much, nor how much their total assets really are worth.

Maybe Elizabeth Kerr could earn her gold watch by turning her hand to discovering the truth about charities and leave small business and small savings alone.