90 seconds at 9 am: Toronto blazes all guns

Airfreight growth extends; China cuts taxes; India on inflation watch; Toronto tackles housing affordability; NZ unit undermines Fujifilm results; UST 10yr yield at 2.24%; oil unchanged, gold lower; NZ$1 = 70.1 US¢, TWI-5 = 75

21st Apr 17, 7:32am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news of a sharp attack on housing troubles in Toronto.

But first, just like Wednesday's view from the IMF, the airline industry today said a survey of airfreight bosses pointed to expanding trade and expectations that this will grow strongly in the rest of 2017. All regions are seeing this expansion, from emerging economies to the developed world.

China is stepping up the pace of tax cuts, with a second set for 2017 announced overnight. All up, that is tax relief for both individuals and businesses of about NZ$800 bln.

Earlier this month in India, their Reserve Bank tightened monetary conditions in a surprise move. Maybe more is coming. Minutes from that earlier meeting reveal the rising concern policy makers there have over the pace of the re-emergence of inflation.

A Canadian province has announced major changes to the regulation of its housing markets. Ontario has instituted a 16-point plan to control a very frothy situation. It includes rent control, a 15% “Non-Resident Speculation Tax”, anti-flipping rules, a 'vacancy tax', and a new effort to build more housing to meet local demand.

In Japan, Fujifilm postponed its earnings announcement and said it expected a loss of some US$200 mln over possible accounting irregularities at Fuji-Xerox in New Zealand.

In New York, the UST 10yr yield is back up today and now at 2.24%.

Oil prices are unchanged today and still just under US$50.50 for the US benchmark, while the Brent benchmark is now just under US$53 a barrel.

The gold price is also lower again by another -US$5 and now at US$1,278/oz.

The New Zealand dollar is marginally higher today at 70.1 USc. On the cross rates the Kiwi dollar is at 93.1 AU¢ but against the euro at 65.4 euro cents. The NZ TWI-5 index is just on 75.

If you want to catch up with all the changes 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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32 Comments

by sharetrader | 21st Apr 17, 7:48am 1492717696

classic looks like MBIE could not cloud the information like the foreign buyers register.
why don't MP;s read interest.co plenty of good research and articles by david and the team

http://www.stuff.co.nz/national/91742963/mbie-worried-ministers-wont-li…

by two otherguys | 21st Apr 17, 8:10am 1492719041

Can you expand on that. Not 100% sure what you mean.

by sharetrader | 21st Apr 17, 8:24am 1492719877

I can see a lot of these measures appearing here in ten years
. It includes rent control, it will happen if greens sit at the cabinet table, and the real reason to curtail government subsidies on housing and cut government expenditures
anti-flipping rules, can see the bright line test amended and a higher rate for shorter term sales
a 'vacancy tax', can see this one as well but may not be needed if they implement a foreign buyer ban

by two otherguys | 21st Apr 17, 8:15am 1492719336

Not just "A Canadian province" - should read "ANOTHER Canadian Province"

The first to introduce a 15% Stamp Duty Tax was Vancouver on the West Coast, capitol of British Columbia. The expected effect was a spillover of non-resident buying into Toronto on the East Coast which didn't have controls. Exactly what happened. Now, 1 year later, Ontario introduces "harmonised" controls

Toronto (pop 2.6 million) Capitol of Province of Ontario (pop 13.6 million)

by murray86 | 21st Apr 17, 8:23am 1492719796

These regs are along the lines that I and a few others have been calling for for some time in NZ now. Not sure that they go far enough in some areas. It will be interesting to see the impact. In the meantime however it is interesting to note tht the Government has for sometime now thought it acceptable to subsidise the crisis here in NZ to the tune of more than $2 billion per year, year on year. I wonder if they had just spent one year's expenditure on real solutions where we would be now?

by nymad | 21st Apr 17, 9:11am 1492722663

I know you are fond of price ceilings for rent but I'm sorry, rent controls in a constrained rental market is the crappiest of crappy ideas.

The fundamental supply issues are what is needed to be prioritised. Adding complicated taxation and rent ceilings is just going to screw the market.

by frazz | 21st Apr 17, 9:23am 1492723418

The market is already screwed - we need measures to fix it rather than head in the sand politics! many countrys have rent controls -funny enough they also have the happiest people on earth - go figure?

by Ralph | 21st Apr 17, 10:18am 1492726716

Firstly, Ontario has had rent control in place since Jan 31st 2007 and yet here they are.

https://en.wikipedia.org/wiki/Residential_Tenancies_Act,_2006

Secondly, I think it fair to say the jury is still out on whether rent control (in its many various forms) can fix anything at all or whether it makes things worse.

Assar Lindbeck, "next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities."

by nymad | 21st Apr 17, 11:20am 1492730440

The market isn't a true free market - that's the only reason it is screwed.
Here you silly armchair economists are advocating for more controls on the market? That's not the way to fix it.

The way to fix it is identify the issue. The issue is supply. It always has been.
Fix this and you fix the housing issue.
One sure way to make the supply issue worse is to introduce rent controls and more taxation.

Don't use the argument of Scandinavia and Central Europe. It's a stupid argument and does little to further your rhetoric.
If you can't see the huge obvious differences between these countries and New Zealand, your opinions are forever doomed to be ignored.

by murray86 | 21st Apr 17, 11:19am 1492730379

Rent controls would only be necessary in an out of control market, and that is what we have now. Only land lords and investors will be against them. Just plain parasitic greed!

Rent controls are part of a whole tool box, all of which have a part to play. Increasingly it is being recognised that the "neo-liberal" free market doesn't work because of manipulation and greed. This only benefits a small minority at the expense of everyone else. You have been subsidised for too long now. Over due for it to stop. the sooner the better. Let's look after the ordinary people of this country!

by nymad | 21st Apr 17, 11:29am 1492730940

No. They are never neccessary.
Especially not in a housing market where there is a supply issue.

The neoliberal free market doesn't work?
Give me one piece of evidence to support that.
It may be trendy among you liberals to throw that argument out there in the context of Western nations, but the fact of the matter is that we don't have anything close to a free market.
In fact, in the instances when there has been minimally regulation, free market economics has provided unparalleled wealth access to workers.
The only failure is on the part of people like yourself who keep advocating for the regulation of the market.

The fact of the matter is that socialism is a crappy idea in theory and in practice inequitable and regressive.

by M.Aurelius | 21st Apr 17, 11:41am 1492731708

Ok so, your either not listing or don’t understand what everyone is trying to tell you.
First, rent control doesn’t work and in a situation where the market is out of control adding rent control will it puts it more out of control.
Second, if there is manipulation then it’s not a free market and adding rent control is more manipulation making it less of a free market. So you either want less manipulation or rent control you can’t have both.
You say you want to look after the ordinary people but you’re basically suggesting shooting them in the foot.

by murray86 | 21st Apr 17, 12:03pm 1492733019

For both you M and Nymad - firstly i am listening, and all I hear is vested interests trying to protect their own little pot of gold. Rent controls don't work probably because land lords give up on maintaining properties and resort to just land banking. In other words they push back against the regulation rather than do what they want to be recognised as doing - that is providing a genuine social service that provides accommodation for those who WANT to rent at an affordable price (that is affordable to the renter). This hasn't happened for so long it is criminal. So in other words they manipulate the market.

I don't believe the problem is only supply. Nymad how many homes are sitting empty in AK? I hear anecdotally from a variety of sources that there are lots. But the truth is no one knows because the government (local and national) does want to ask the question. Equally the Government has consistently refused to ask the right questions as to how many residential properties are owned by foreigners not resident in this country. They love presenting numbers that purport to illustrate this, but as many commentators on this site point out the methodology of how they got them is so flawed that the results are simply not reliable.

So no I do not accept your argument, but instead believe a balanced tranche of regulation to restrict manipulation and greed, to provide affordable accommodation to everyone is required. As a part of this i do believe that residential properties price must fall - significantly!

Finally answer me this - the OIO has an overview of foreign investment/ownership in sensitive land/property. With the current state of affairs why isn't residential property considered to be sensitive land?

by BadRobot | 21st Apr 17, 12:23pm 1492734232

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

Upton Sinclair

by Ralph | 21st Apr 17, 12:29pm 1492734553

Landlords are investors.

They take their hard earned money and invest in housing.

Rent control manipulates the market to force that investment to be unprofitable.

No wonder the investor stops pouring money into his dud investment.

Article on some ofthe problems with maintaining rent controls:
http://individualrightsgovernmentwrongs.com/property/rent-control-the-m…

by nymad | 21st Apr 17, 12:42pm 1492735322

I don't understand.
How do I have vested interests?
Am I not advocating for a fall in prices by stating that the issue is with supply?
My only vested interest is the survival of Auckland city as I like it here. The way its going, it's going to die. And, even faster if we implement more market controls without addressing the core issue.

Ironically, it is you who is advocating for a reduction in living standards for all by suggesting increased taxation and price controls.

by sharetrader | 21st Apr 17, 12:06pm 1492733165

whats needs to be removed is the subsidies to rentiers now to get a true free market.
take away the incentives to own a rental house over other forms of investments and do away with the accommodation supplement.
instead use those funds saved to increase the supply of houses, the market will bring the pricing down

by Joe Public | 21st Apr 17, 9:23am 1492723425

National had a short term mindset much like Front Office Staff in a bank.

Short term gain with house prices rising with little to no concern about the long-term costs/consequences of having such high house prices.

by Fritz | 21st Apr 17, 8:25am 1492719936

Good on Toronto.
It's been patently clear for a long time that National's singular focus on 'market enabled' supply has been a failure.
Talking to a developer yesterday, he told me out of every 10 potential developments he looks at, 9 don't stack up. Mainly due to build costs and unrealistic vendor expectations.
Much more needs to be done on the demand side, plus freeing up say 30% of Auckland's hinterland for cluster housing development, which can readily stack up because of the low land values.

by two otherguys | 21st Apr 17, 8:52am 1492721523

a bit of perspective

It's the spillover contagion effect

The distance between Vancouver and Toronto is 2090 miles or 3364 kms. Canada has a Federal State system similar to Australia where the States and/or Provinces are independent. The significance of the Tax moves above is Ontario has moved to catch up with BC because the BC foreign property speculation virus was shifting to Ontario and Ontario didnt have the infrastructure to cope and withstand the social disruptions so they moved

Comparatively, the distance between Sydney and Auckland is 1340 miles or 2156 kms, nearly half the distance

Australia has shown an appetite for introducing and operating CGT taxes and Land Taxes and Border Controls and Immigration Controls. One can now expect a shift of penetration emphasis from Sydney and Melbourne to New Zealand. For sure.

But New Zealand does not have the political spine to harmonise and protect its borders

by RickStrauss | 21st Apr 17, 9:13am 1492722821

True...when talking of political spine to address these things I'm left wondering where to look for a spine in a jellyfish.

by gingerninja | 21st Apr 17, 2:14pm 1492740875

"do do do doooo
do do do doooo
aaah ahhhh
Where have all the good men gone
And where are all the gods?
Where's the house-wise Hercules to fight the rising odds?
Isn't there a politician upon a fiery steed?
Late at night I toss and I turn
And I dream of what I need
I need a housing crisis hero"

by Joe Public | 21st Apr 17, 9:26am 1492723574

a 15% “Non-Resident Speculation Tax”... David to add to your statement the 15% TAX is imposed on those that are not citizens, permanent residents or Canadian corporations. Some can get rebates later if granted citizenship.

Per link below:
Premier Kathleen Wynne announced Thursday that a non-resident speculation tax will be imposed on buyers in the Greater Golden Horseshoe who are not citizens, permanent residents or Canadian corporations.

Fantastic exactly what NZ Government should be doing.

http://www.ctvnews.ca/business/ontario-to-tax-foreign-buyers-expand-ren…

by RickStrauss | 21st Apr 17, 9:26am 1492723567

National will NEVER do this.

It's up to voters to demand such measures from other parties in exchange for their votes.

by Joe Public | 21st Apr 17, 9:32am 1492723965

National are out next election. They has 9 years to sort this out.

- They focussed on Supply and did nothing to target demand
- They still have no idea about the impact of foreign students & Temp Visa Workers 2 years after they started that little project (LINZ..... have they sorted out the survey yet ?)
- Focus on Non Resident forgetting the Resident Foreign buyers
- While other Governments impose Foreign Buyer Stamp Duties (Canada, AUstralia, Singapore) NZ just stands there doing nothing

Labour have a plan. They will Ban foreign buyers. Their foreign buyer definition includes everyone that is not a citizen or permanent resident.

http://www.labour.org.nz/cracking_down_on_speculators
Labour’s ban on foreign speculators purchasing existing houses will be based on the Australian policy. Under our policy only citizens and permanent residents will be able to buy existing homes. The ban will also apply to foreign trusts and foreign corporations.

by puketepapa | 21st Apr 17, 9:29am 1492723769

Interesting - they can also target a specific area containing 9 million out of a total population of 12 million
Greater Golden Horseshoe area stretches from the Niagara Region to Peterborough, Ontario, is home to about 9 million people and is one of North America's fastest growing regions.

by puketepapa | 21st Apr 17, 9:34am 1492724041

National must be scoffing valium by the bucketful

A Non-Resident Tax is the safest political move any party could possibly propose

Doesn't hurt any voters

It's a guaranteed winner for Labour or Gareth Morgan or NZ First

by Joe Public | 21st Apr 17, 9:38am 1492724324

Forget Non-Resident focus on Foreign Buyer like they do in Australia

Foreign buyer includes all those that are not citizens or Permanent Residents

Non-Resident - only includes people off shore so excludes Students and Temp Visa workers who make up the bulk of foreign buyers.

Media love the term Non-Resident as it excludes Resident Foreign Buyers (Students & Temp Visa) so the figures look much smaller.

Foreign purchasers

You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.

http://www.sro.vic.gov.au/foreignpurchaser

You are a foreign purchaser if you are not:
-A citizen or permanent resident of Australia,
-Or a New Zealand citizen with a Special Category Visa (Subclass 444)

by Andy Rodgers | 21st Apr 17, 9:36am 1492724168

I think a lot of interest.co.nz readers don't understand the main drivers of the current housing market in NZ. The MP's in the National Gov't and their wealthy backers are the main beneficiaries of the current housing market. They gain in two ways:
1. As property investors they get the lions share of the $2 billion annual accommodation supplement benefits.
2. The capital gain they receive when they sell is tax free.

Why would they want to change a system, that I agree is not serving the vast majority of NZ'ers, and would harm them financially?

Also this idea of a property tax on foreign buyers mainly helps the Gov't as they get the money. Surely the simplest measure is to ban foreign buyers of NZ property, it's as simple as that.

by Ralph | 21st Apr 17, 10:30am 1492727411

Where is your evidence that the majority of housing investors vote national?

How do you know only national MP's own houses?

How many house do these MP's own?

by dictator | 21st Apr 17, 9:42am 1492724543

I'm rather surprised at this interview with Jim Bolger where he states that neoliberalism has failed. ZS better comment and call Jim Bolger an extremist.
http://www.stuff.co.nz/national/politics/91769882/the-9th-floor-jim-bol…

by Ralph | 21st Apr 17, 10:27am 1492727226

Is anyone else enjoying the 9th Floor series?

I think its brilliant.