90 seconds at 9 am: Housing bubbles beyond Auckland

Housing boom passes in Aus; Luxury home listings soar; Fed president talks up rate hike; PBoC red flags P2P; Greece in trouble again; UST 10yr yield 1.85%; oil up, gold down; NZ$1 = 67.0 US¢, TWI-5 = 71.2

31st May 16, 7:43am by Jenée Tibshraeny

Here's my summary of the key events overnight that affect New Zealand, with news home sales are on the decline across the Ditch, as the peak of Australia's housing boom passes.

A Housing Industry Association survey shows new sales fell 4.7% in April, with a fall in multi-unit sales driving the drop. The Association's economist says April's drop is mild and comes off strong March results. He says there's still potential for "very healthy" construction activity throughout the rest of the year.

Luxury realtors, Christie's International Real Estate, warns there's a concerning pileup of US$100 million-plus homes on the market. The agency has told the New York Times the spike in listings comes as sales are cooling. It warns the sudden surge in hyper-priced homes - often sold by speculative investors - is the ultimate bubble signal.

The St. Louis Fed President, James Bullard, has come out saying global markets appear "well-prepared" for a summer interest rate hike. Although like the chair of the US central bank, Janet Yellen, his comments stop short of pinning down a date.

The hint of a hike Yellen gave over the weekend has seen the US dollar index rise to a two-month peak and European shares hit one-month highs.

The People's Banks of China has put peer-to-peer lending under the spotlight, warning its existing supervision framework isn't "compatible with the problems in the financial sector". It says new private lending and internet finance are exposing financial institutions to more risk, so regulators need to consider introducing macro-prudential oversight where necessary.

Finally, Greece has told its European and IMF creditors it cannot implement some of the extra changes sought in exchange for fresh bailout loans. The disagreement could further delay the disbursement of the bailout funds which Athens badly needs to pay off IMF loans in June, bonds of the European Central Bank maturing in July, and increasing state arrears.

In New York the benchmark UST 10yr yield remains at 1.85%.

The price of the US Crude and Brent benchmarks have crept a little higher overnight to just below US$50/barrel.

The price of gold has continued to slide to US$1,206/oz.

The NZ dollar starts the day fairly weak. It hasn't recouped any ground against the US following Yellen and Bullard's comments. It's at 67.0 US¢, 93.2AU¢ and 60.2 euro cents. The TWI-5 index remains at 71.2.

If you want to catch up with all the local changes from yesterday, we have an update here.

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

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31 Comments

by sharetrader | 31st May 16, 8:06am 1464638762

yellen will not hike in june or july, I am picking august September this year for the final hike of the year

by Stephen Hulme | 31st May 16, 8:19am 1464639588

As the US and EU continue to secretly debate the controversial Transatlantic Trade and Investment Partnership (TTIP), talks aren’t only taking place behind closed doors. Frustrations are also being aired online, according to emails obtained by Politico.

An email sent on Friday and obtained by the website shows the European Commission warning the 28 EU ambassadors in Brussels that there will be no TTIP deal unless Washington changes its approach to negotiations.

The document focuses on agriculture, one of the most contentious of the 27 chapters currently under negotiation in TTIP talks.

The email expresses the Commission’s concern that “the EU has not seen substantial progress in areas of significant importance to EU agriculture, such as geographical indications, wine and non-tariff barriers.”

It goes on to state that “the US Administration does not yet seem to be in a place where it can reciprocate the EU’s efforts in TTIP and to start delivering on matters of EU interest.” Read more

Any disclosure of NZ email exchanges protesting effectively denied TPPA agricultural access to US markets?

by James007 | 31st May 16, 11:19am 1464650351

Since JK stopped texting Whaleoil, these emails haven't been released :)

by Stephen Hulme | 31st May 16, 8:26am 1464639996

Is it possible any Auckland residents harbour thoughts similar to those expressed in this outburst?

"I am almost 50 years old, I have a University degree, and was – out of love for nature – always a trusted voter for the Green Party. I never felt much interest for politics. In Germany everything seemed to always go its natural regular course. I had trusted our parliamentary democracy, I thought our administration would hardly make mistakes, because it is controlled by the opposition. Never, absolutely never did I think that I would lose all my trust in the State. It’s unbearable that I am afraid of the future. Preferably I’d just like to leave. But I feel too old to leave Europe...I am – like most Europeans – damned to impotence as I see this invasion happen." Read more

by muntijaqi | 31st May 16, 9:29am 1464643774

I'm not surprised somebody who "didn't have much interest for politics" wants the Deutschmark back because doesn't understand that if there is a winner with the EURO, that is Germany.
The Deutschmark would be worth much more given the surplus of their trade balance and they would be able to export less. Maybe then the most well prepared Europeans from France, Spain, Italy, Greece, Romania, Slovenia, Czech, etc. wouldn't go to work to Germany and their high added value industry wouldn't be the same. Maybe then southern European countries would re-industrialize since the requirement to destroy industry in the south would not be in place anymore.

Maybe without the Euro German banks wouldn't have funded the German reunification by essentially converting 1 East mark to 1 West mark and then both to 1 Euro (since they were the reference) passing the cost to the rest of Europe.

Maybe then they wouldn't have lended recklessly thousands of millions into Greek and Spanish bubbles knowing that when the bubbles burst the governments of those countries would convert private debt in public debt and would even modify the Constitution (like the Socialist party did in Spain) to give priority to the debt repayment before ANYTHING else.

I say yes. Let's break the Euro. Let's break the European Union. After all it's only a union for economic powers, not for Europeans.
There is nothing more insulting than seeing the only ones benefited by this ridiculous system talking about how sad they feel after what they have done to the rest of Europe.

Let's not forget either that it was Merkel who opened borders for massive immigration. Let's not forget it was her who keeps talking with Turkey about joining EU despite evidences of connection between Turkey's government and terrorism and despite a constant violation of human rights and massacres towards Kurds.

And now what? their population will open their eyes and justify turning to fascism again? Disgusting

The problem of Europe is Germany. Just as always during the last 2 centuries.

by KH | 31st May 16, 9:32am 1464643962

Yes Stephen. An economy has to be for the inhabitants. Clearly New Zealand does not have that.

by James007 | 31st May 16, 11:22am 1464650558

If you have blue blood and donate to the blue party, then the economy is more for you. if you are a land banker close to our largest city, then the economy is even more for you.

by murray86 | 31st May 16, 9:50am 1464645014

Agreed, this person is also showing what I believe to be is a typical level of political naivety, for most people. We have been brought up to trust our public institutions and most still do, but the reality is most government MP's (or what ever they are in their country, senators, congressmen etc) are actually driven by self-interest rather than public service, and this is not taught in our educational institutions. Thus most people are politically illiterate and consequentially gullible to the consequences. Pity because it is only through political awareness that we can hold our Governments to account in a democracy. As it is action only occurs after considerable damage has already been done.

by middleman1 | 31st May 16, 10:13am 1464646411

A significant part of Trumps support comes from your 'politically illiterate gullible to the consequences' portion of the community who have in response to his bizarre rhetoric become 'politically aware' enough to participate in the election process. Be careful what you wish for.

by KH | 31st May 16, 11:03am 1464649393

Trouble is middleman the supposedly politically smart ones, have proved to be gullible. Look at where we have got to. It's a mess and we are all being screwed. Have a rethink on who you think are the smart ones

by middleman1 | 31st May 16, 11:28am 1464650923

Economic performance dictates many societal outcomes but a large percentage of the population have only vague ideas on which models and policies are likely to deliver what we want. ‘News’ is trivialised sound bites selected by backroom shiny suits to construct the political picture they wish to paint. Insightful analysis is thin on the ground and properly considered by only a minority of voters. In this Truman show setting, widening our voter participation would exacerbate societal economic ‘gullibility’, not reduce it.

by Henry_Tull | 31st May 16, 11:10am 1464649800

And what do you make of the of ongoing example of Tony Blair?

http://www.telegraph.co.uk/books/what-to-read/tom-bowers-biography-brok…

https://www.amazon.co.uk/Broken-Vows-Blair-Tragedy-Power-ebook/dp/B0193…

Interesting to see what some do once having had power.
Can't see the current bloke playing the Ted Heath card.

by middleman1 | 31st May 16, 11:54am 1464652484

The review is very critical of the writers accuracy and motives. A hardly compelling case for the proposition Blair was deeply flawed. He has become an easy target following the Iraq debacle but we forget just what a darling he was of the trendy part of society.
But yes, the Tony show seems to have been drawn into the orbit of some most unsavoury characters, if the media is to be believed. Very strange. Soon he'll be claiming Mugabe doesn't have WMD.

by murray86 | 31st May 16, 12:20pm 1464654048

Political literacy is not just about awareness, but also a willingness to debate political issues, and listen to opposing perspectives with an open mind. Rogernomics is a good case in point. i originally thought it was a good thing, but now realise that it wasn't. The amount of information available at the time limited ones ability to research and understand consequences, however today, site such as interest.co.nz offers a very good source of widely disparate views, some based on experience, some on education, some on the second tempered by the first, but all of which adds to any readers education if they are prepared to listen.
Many of Trumps supports are not what i'd describe as "politically literate", they do however understand that the existing political systems have been failing them for years and have finally got to the point that enough of them will support a radical outsider, thus giving the system the proverbial finger. The problem is, their illiteracy means they are not considering the potential consequences.

by Roger Witherspoon | 31st May 16, 11:52am 1464652328

Most of what you say is true, but the Germans are not to blame. The fault is in the ideas that came out of France and were very effectively put into place by the bureaucracies of Europe. The Germans gave up their beloved Deutschmark because the French demanded it as the price for French support for re-unification. At the time it all seemed like such a good idea. Mrs T did warn them, by the way.

by DFTBA | 31st May 16, 2:26pm 1464661618

by DFTBA | 31st May 16, 2:26pm 1464661561

The European Union also came about to strengthen European identity, and to prevent the fracturing which always precedes a big war.

by PeterPen | 31st May 16, 1:32pm 1464658376

We need the checks and balances of a Swiss style direct democracy, both in New Zealand and in Germany. Obviously, in both countries the so-called governments are democratically no longer legitimized. They are constitutionally bound to further the interests of the people who voted them in (and hand them their taxes), and not the interests of global investors or illegal migrants. The governments of New Zealand and Germany are in breach of the social contract and are hereby fired.

But as usual, the peoples of those two countries are too mediocre and timid to vote their corrupt establishments to hell. It will take the last superpower to set an example that can be aped.

by Roger Witherspoon | 31st May 16, 3:37pm 1464665842

Yes, indeed. We almost never get a chance to actually decide anything. We are not to be trusted. Would Auntie Helen have even trusted us to choose if we wanted a new flag, I wonder? We are certainly not going to be trusted to choose anything important. The Brexit debate is fascinating in this regard.

by ngakonui gold | 31st May 16, 10:49am 1464648543

Most of his support comes from the people that were previously gullible enough to vote for the status quo and look where that got them.

by Andrewj | 31st May 16, 10:59am 1464649170

Huge numbers of disaffected people in the States who have been suffering through years and years of falling real wage growth and increased healthcare and pension funding costs. They have no voice they are the maginalised, they will reach out for anyone offering hope and an escape from the reality of, high unemployment, lack of opportunity and increased costs, while the politicians tell them there is no inflation and student debt is a great thing.
People are sick of the homeless living in cities, the beggars the drunks the down and outs, the unemployment caused by the shift of manufacturing to Asia, and it's resulting Meth epidemic, which is closely related to the mid-west's, lack of opportunity and high unemployment, high student debt and the numbers of army vets failing to get the support they need.
The USA is going to have a revolution at the ballot box, one way or the other, the people are feed up with the bullshit, they want to take their country back.

by DFTBA | 31st May 16, 2:48pm 1464662927

All those (high unemployment, low wages, etc) are all a result of increased globalisation, free trade, and neoliberal ideology.
.
They can choose one of two directions: either retract and defend their own wee patch, or, band together in big masses and force change through sheer numbers.
Looks like the former is the preferred choice of many.

by middleman1 | 31st May 16, 11:12am 1464649923

Exit polls agree with you - higher ppn of people who feel marginalised are supporting Trump
What would 'taking their country back' look like I wonder. Raise the shutters, pretend the rest of the world does not exist, Detroit will be great again, no Mexican or Muslim workers on the assembly lines of course , women OK provided they fit the subservient model.

by KH | 31st May 16, 11:25am 1464650755

Middleman. I think the "one percenters" got it wrong. Plenty of one percenters here as common taters on interest.co. and like almost everybody in our country are being screwed as well. It's not just the working classes who are being robbed, it's the middle classes who are being eliminated. As in the USA.
Our foe is the 0.00001 percent actually. Gullible? Spread your net wider than Trump voters.
Tell me, what do you think about Bernie then ?

by middleman1 | 31st May 16, 11:43am 1464651826

He’s the (documentary maker) Michael Moore of US politics – very appealing, great story teller, speaks to our hearts not heads, bullseye on some targets but must know his line is simply not credible on others. EG his populist attack on the excesses of the financial illuminati – I mean , someone called Bernie is going to reform the entrenched privilege of the American financial elites? Dream on. Look at the massive struggle Obama faced in trying to bring some sanity to just healthcare.

by KH | 31st May 16, 6:18pm 1464675480

I'd be surprised as you if Bernie beat Wall Street. But it's still a major turn of the tide that he gets so close to being a presidential candidate. Significant.

by Smalltown | 31st May 16, 12:08pm 1464653337

Intelligent voters can see that government is in the control of the rich minority so they will use Trump to get a reset of the status quo. They are probably aware there is a high probability that it will end in disaster but they are fed up with the inequality their version of democracy is providing.
Who will be our Trump? I know who our Crooked Hillary is.

by middleman1 | 31st May 16, 2:43pm 1464662636

Look no further than Northland. Feelings of marginalisation, incumbent Govt perceived as smug and out of touch, in bed with the 1 percenters etc, enter our own Winnie ' the Don' Peters.

by Baza-b1 | 31st May 16, 2:56pm 1464663394

Really interesting Podcast on money laundering and property. It seems this is whats happening in Auckland with these empty houses in some of our most desired suburbs.
See Episode # 703 How To Hide A Million Dollars In Plain Sight at http://www.npr.org/podcasts/510289/planet-money/

Seriously have a listen

by fat pat | 31st May 16, 11:33pm 1464694401

Nice link. Bribe from financial company delivered in fruit boxes to former Taiwan president Chen Shui-bian. The money is deposited in a Swiss bank account before being invested in a New York Manhattan apartment. The actual purchase is made by Chen’s son Chen Chih-chung who employs multiple layers of shell companies to disguise the identity of the money.

This sort of thing can’t be happening in Auckland. John Key has given us assurances. He said its all about supply. If you put close your eyes and block your ears and say supply three times then it will be true.

Supply also rhymes with the heading from the listing of this St Heliers house “Devour your slice of property pie”.

by MortgageBelt | 1st Jun 16, 7:15am 1464722139

Where is the finance coming from that is pouring into Auckland property?
Through complex chains internationally - with the end "buyer" being disguised as students, companies, trusts, friends, family members etc. so the 'stats'' will not pick up the volume of money coming into NZ property.