A review of things you need to know before you go home on Tuesday; Fixed and floating rates raised, home ownership rates fall; China PPI leaps, Aussie retail stumbles; swaps fall, NZD rises

A review of things you need to know before you go home on Tuesday; Fixed and floating rates raised, home ownership rates fall; China PPI leaps, Aussie retail stumbles; swaps fall, NZD rises

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

MORTGAGE RATE CHANGES
We had mortgage rate rises from Kiwibank, TSB Bank and NZ Home Loans (the second time this week). The most interesting was from Kiwibank who not only raised fixed rates (not unexpected), but they raised their floating rates as well (and that was unexpected).

DEPOSIT RATE CHANGES
No changes to report today.

A LONG TERM SLIDE
Statistics NZ updated their data today so that we could calculate our home ownership rate. As at December 2016 it is 63.2%, and that compares with December 2006 at 66.6%, and December 1991 (25 years ago) at 73.3%. (In 1951, it was 61.2% according to a note in a Labour Party press release.)

AN OUTLIER
The equity markets locally didn't get the memo. Today they are up, again, by about +0.3% - and that contrasts with Wall Street, and most other markets in our time zone which are lower. The ASX200 is down -0.8%.

ENGINE ROOM INFLATION
Data out in China this afternoon shows that CPI inflation there was up +2.1% in 2016. China inflation levels have large international ramifications. Even more influential is their PPI (Producer Price Index) inflation, and that has turned around remarkably. In 2015 that was actually deflation of -5.9% whereas in 2016 it has turned into inflation of +5.5%. Now, that is fast-rising in anyone's language. Part of this rise is because iron ore and coal cost them much more.

NOT ON ALL CYLINDERS
We don't have the Aussie (or NZ) retail sales for December yet. The NZ ones will come on Friday. But the Aussie data for November was out today and the consensus is that it shows a 'stumble'. They will be hoping for better Christmas data.

WHOLESALE RATES YO-YO
NZ swap rates are down today -2 to -4 bps across the curve today, giving back most of yesterday's rises. This essentially follows Wall Street. The 90 day bank bill is also down -1 bp and now at 1.98%.

NZ DOLLAR UP
The currency market is still quiet. We saw a strongish rise in the NZD overnight, but it is settling back a little now. The NZD is at 70.3 USc. On the cross rates, it is at 95.4 AUc, and at 66.3 euro cents. The TWI-5 index is at 76.4. Also of note is the weak GBP and the NZD is now up to 57.8 UKP. Check our real-time charts here.

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20 Comments

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Some notes from latest statistics on homeownership
1) In Q4 of 2016, total dwellings increased by 6,600 and only 35% of that increase is attributed to owner occupiers (the rest being attributed mainly to rentals).
2) Dwellings for 2016 increased by 25400, a 1.41% increase , compared with a population increase of 2.1%
3) Average number of people per dwelling seems to have increased from about 2.58 to 2.6 or so

2017 is going to be another good year for hard working New Zealand family home owners. Interest rates are at record lows and Immigration is at 70,000 plus people every year.

20
up

Home ownership rates can only continue to slide, with the taxation system so strongly favouring landlords and investors over first home buyers. Totally corrupt system, wouldn't be acceptable in any other OECD country.

Philly, please explain to us all how the taxation system favours investors?
If many of the investors in Auckland are negatively geared then they are subsidising the living costs of their tenants aren't they?

12
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no the taxpayer is subsidising them, they are just taking advantage of a flawed system moving the responsibility of governments to provide enough cheap housing to its people

13
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Ahh, zero capital gains tax?
Negatively geared investors aren't subsidising renters. Negatively geared investors are being subsidised by all tax payers.

Pretty obvious. Landlords can claim the losses, ie interest payments, against their main income streams. A first home buyer hasn't got the ability to deduct their interest payments against anything.

D'ooh.

[ silly, pointless comment removed. Keep it sensible please. Ed ]

So Bill English didn't state the housing is more affordable now than we Labour were in power? Am I mistaken?

The hilarious thing is that you let blatant trolls like Double GZ, Zachary and Ted say whatever they want without zero consequences, but when I go against the narrative, I get censored.

Was it English or Nick Smith? I don't remember, but one of them did make exactly that absurd statement within the past few months.

I thought it was Smith, but not suggesting that English didn't as well

Philly, that is the point, if landlords are losing money then they are subsidising the tenants!
Of course owner occupiers can't claim the interest as they are living in the property and it is therefore not a business tax deduction.
The investor is also paying interest on the house that he is living in and therefore that interest is not tax deductible so there is no difference.
Personally don't have negatively property whatsoever, but if people are prepared to accept a loss on a property on the basis that there is capital gain then it is a gamble that may or may not pay off.
If their is a loss the tax payer doesn't subsidise the gambler.
Property in other parts of NZ are still very affordable and if you don't like what has happened in Auckland and you want to get ahead in life, then perhaps you should move?

10
up

No problem to me, I have a mortgage-free house etc. But I can still have empathy for the young renters who are competing against landlords who can leverage their other properties for equity, claim losses to reduce their tax liabity & get a nice tax return (thus being subsidised by the long-suffering taxpayer), and then walk away with nice tax-free capital gains. Totally inequitable.

As for your argument that landlords can't claim the costs of the house they are living in, you need to explain how that has the slightest relevance.

That "nice tax return" doesn't cover the costs involved in getting it. The bigger that tax return the more money that had to paid on rates, insurance and topping up mortgages etc. It's like people being jealous of you because you finally had a win on the horses even though you consistently lost much more all through the year.

10
up

If this were so, why are all these landlords such suckers who enjoy losing money?

The answer is of course an untaxed capital gain which more than offsets any losses. It's like going to the races, losing $10 on each race and then being given $1000 at the turnstile on the way home.

It's also an argument as to why Auckland in particular is such an unsustainable bubble - when income doesn't cover costs, let alone principle, that is speculation.

The possibility of capital gain is unrelated to the running costs. It is not unusual for businesses to have major losses in the first few years of operation. Some never really make a profit but get a big windfall when they sell to a competitor.

Interesting comment posted on Macrobusiness this afternoon;
http://www.macrobusiness.com.au/2017/01/macro-afternoon-114/

“Just had an interesting call with a contact who specialises in “other” funds movement out of China. The quoted rate for USD$1,000,000 today for the FEES was 12-18% depending on the risk factors of the person in China and assumed destination was Australia…..” I suspect that this may have an impact on the upper end of the market…..

For comparison, 12 months ago the same method was at 5-8% on fees. Bank of China quoted me 10% fees to “cash” a Standby Letter of Credit denominated in Yuan at the same approx level, and 2% if the SLOC is denominated in AUD. This channel is popular with HNW individuals who prefer to have no records of the transfers and the destination. Can readily move 10’s even 100’s of million this way if you want to pay the piper, but at the current rates, even the broker asked why would you bother unless you were desperate….

Philly, you sAy you have a mortgage free home.
Why on earth would you not be utilising the equity in your home to purchase an income producing asset to improve financial position.
Certainly makes no sense whatsoever to not have purchased a positively geared property if you say that property investors have got this great advantage over owner occupiers.
I know why you haven't, because you feel sorry for all non home owners and don't wish to fuel the fire!
Yeah right!

I'd hazard a guess Philly finds the cottage industry utterly boring and tedious.

Why wouldn't someone do what they perceive to be the right thing, we have enough people already who are quite happy to deny others the ability to purchase their own homes by outbidding them, thereby creating their own customers and even many going so far as to happily taking money from the public purse (accommodation top ups) to subsidize their OTT rents.