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A review of things you need to know before you go home on Friday; Getting nervous in Auckland real estate land? Chinese shares down 27% in 3 weeks; The Smith & Brown housing show & more

A review of things you need to know before you go home on Friday; Getting nervous in Auckland real estate land? Chinese shares down 27% in 3 weeks; The Smith & Brown housing show & more

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

TODAY'S MORTGAGE RATE CHANGES
ASB, Bank Direct and Sovereign cut their one-year "special" rates by 10 basis points to 4.89%

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

CONCERN MOUNTING IN REAL ESTATE LAND?
Barfoot & Thompson, Auckland's biggest real estate agent, reported its strongest June sales volumes since 2003 with median sales prices hitting a fresh record high of $786,000. However, managing director Peter Thompson grumbled that only 159, or 13.6%, of June's 1167 sales were for under $500,000. Thompson blamed the Reserve Bank's restrictions on banks' high loan-to-value ratio lending, calling for "an easing of restrictions as it relates to homes of $500,000 and below," which would enable more buyers at the low end of Auckland's overheated market to gear up. Thompson also suggested there was "a growing feeling among buyers and sellers that homes are close to being fully priced."

THE SMITH & BROWN SHOW BRINGS MORE HOUSES TO 'AUCKLAND'
Housing Minister Nick Smith and Auckland Mayor Len Brown unveiled two new "Auckland" special housing areas located in the boondocks of Drury and Glenbrook. The two greenfields developments will see up to 1,800 homes built, Smith and Brown say.

GREEN LIGHT FOR AUCKLAND HARBOUR BRIDGE CYCLING, WALKING PATH
Some 56 years after it opened the Auckland Harbour Bridge could finally be opened to forms of transport other than cars. Auckland Council has granted consent for SkyPath, which - assuming it goes ahead - would be a cycling and walking path adjacent to the city bound clip-on lanes of the Bridge.

CHINESE SHARES DOWN 27% IN 3 WEEKS
China's Shanghai Composite Index is heading for its biggest three-week fall since 1992, Bloomberg reports, as Chinese government attempts to shore the market up failed to stop margin traders from unwinding positions at a record pace. The benchmark index was down 3.3% to 3,785.57 by the midday break. That means it's down 27% since June 12. Chinese shares have now lost more than US$2.8 trillion of value in three weeks, ending their longest bull market run.

WHOLESALE RATES 
NZ swap rates are down about 4 basis points across the curve with the one-year rate at 2.99%, two-year at 2.98%, three-year  at 3.07%, four-year at 3.21%, and five-year at 3.36%.

The 90 day bank bill rate is at 3.22%, unchanged.  

NZ DOLLAR
The NZ dollar is slightly lower over the day against the greenback at US67.14 cents, slightly higher at AU88.39c, and a smidgen lower against the euro at 60.5 euro cents. The TWI is also slightly weaker at 71.22. Check our real-time charts here.

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End of day UTC
Source: CoinDesk

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15 Comments

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If the lower quartile for Auckland homes is now $650k then there are simply fewer homes worth less than $500k. No amount of leveraging is going to change that

With swaps at 2.99% we should now have mortgages available at 3.99%

Unlikely. The banks will lose their depositors if they cut rates that low.

agree

and where would depositors go? they have no where except under the bed.

So 50basis points down by Xmas? 75? 100?

They will go for security. Getting your money returned, will be more important than the return.

This afternoon Shanghai down nearly 30% since it's peak on 12 June, just 3 weeks ago.

How much did the 150% rise between April 2014 and June 12 play in the Auckland price boom??

Is this reversal the beginning of the end??

I can guarantee that supply increases won't be the cause of the Great Auckland Property Collapse.

From the Slog.
We've all been focused on the Greece/EU crisis for some time now; but the Shanghai losses since the market high - only 15 trading days - represent ten times the entire Greek gdp during 2014. And even after this correction, the index is still double what it was before the bubble began pumping up. Why?

I would argue as follows: cheap money encourages margin borrowing to get silly; it also causes asset bubbles, and bubbles always pop in the end; the market has been overheated by neolib IPOs that reflect the continuing Chinese retreat from State ownership; having shot too high, a correction was inevitable - but the CSRC has been looking both confused and slow in its reactions.

"Today, we sit in a situation where investors are very long the Chinese equity market, but the valuations have gone from being one of the cheapest markets in the world to one of the more expensive markets in the world," Robert Parker of Credit Suisse told India's Economic Times. Another opinion, however, was more blunt: "China is a big liquidity-bubble unfolding. One day, it will burst," said Quant Capital boss Sandeep Tandon.

Apropos of nothing at all you will have noticed CHBDC are closer to their dearest wish of being "bought out" by amalgamation into a unitary council. With luck the Waipukurau sewer scheme will get lost in the noise of a bigger council

There are all sorts of scenarios about how AKL house prices will progress. All depend on how leveraged "investors" are. A decline in interest in buying won't necessarily cause a price decline. The trigger for a rush to the exits is more likely to be a sharp recession accompanied by job losses and inability to service debt.

I think that when interest rates are at 5%, risk is not being valued. I personally would feel much more comfortable paying twice as high an interest rate on a house at half the house price.( same interest bill. )
Interest rates at 5% tells me that the banks feel there is no risk or they are gambling that there won't be any sort of economic downturn or job losses. If there is in fact a real risk of a downturn and the interest rates that value that risk correctly are 10% then the real value of houses could be half what is being paid for them and at those values the banks would fail. Maybe a bit of simplistic reasoning, What do you think?

As Bob Jones once said "nothing wrong with a bit of healthy inflation".
The real problem currently is that there is little demand inflation left, only price-setting inflation (outside of investment assets).
If wage earners receive 3% increases annually to compensate for inflation, their mortgage debt shrinks in relative terms & in 10 years time it's peanuts.
Therefore debt is magnified in today's conditions, as you imply.

The problem is this is only on property and an economy is not only housing.

"no risk" which is an astounding conclusion for them to make. However consider that the bank's employees bonuses are made by selling product with no consequences for the seller, its other ppls money after all. Would I lend my money out at 2% odd (after tax)? given what I can see around me? hell no. Can I put my meager savings anywhere else but a bank deposit? uh no except under the bed.

In terms of 5% what do you think is the impact on NZ's SMEs when the borrowing rate is 10% and not 5%? If offshore companies can borrow at 3% and NZ companies only at 10% what hope of expansion does our homegrown businesses have?

I'm not necessarily suggesting that we make our interest rates 10%, I guess what i'm saying is that there is risk and worldwide the banking system is not valuing it as they are working with government backing which is in fact our own backing. A ponzi scheme backed by the victims and participants of the ponzi? I have had arguments with people over whether the whole system can fail. I believe it could.
Maybe we could we set our interest rates higher and ban foreign investment? The economy would suffer but we may avoid the possiblity of catastrophic failure of the banking system. Just my crazy ideas, what do you think? ,,,,,Too late for that . Pull out of the ponzi.

Steven Joyce announced tonight on tv news a new proposal to get more foreign investment to prop up dairy farms. In other words plans to sell off NZs strategic assets. Desperate stuff!