What happened Thursday

A review of things you need to know before you go home Thursday; no rate changes, confidence high, less concrete poured, fewer rentals available, Auckland Council valuations up +45%, swaps and NZD lower

16th Nov 17, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes today..

DEPOSIT RATE CHANGES
No changes to report here either.

HANGING IN THERE
The ANZRoy Morgan Consumer Confidence Index eased from 126.3 to 123.7 in November. While that is a seven month low, overall sentiment is still tracking above historical averages. A quick look at a chart will show you why this slip doesn't have anyone worried.

A HIGH POUR
The delivery of ready-mixed concrete in the 3 months to September is holding at a high level even if it is a slip from the June quarter, and barely above the level it was a year ago. Interestingly, it is the main centres that are now showing year-on-year declines; Auckland is down -4.2%, Wellington is down -12.5% and Christchurch down -14.6%. Peak concrete was probably reached in June 2016.

SUCCESSFUL TENDER
The latest tender of $200 mln NZ Govt April 2025 bonds has happened successfully. The yield achieved of 2.67% is the lowest since the June 2017 on a tender that attracted 2.6 times bids.

AUSSIE JOB GAINS
In Australia, their unemployment rate has tumbled to more than a five-year low in October, now to 5.1% (although most other reports will show the seasonally adjusted rate of 5.4%), amid a bigger-than-expected jump in full-time positions. These were up +29,000 from September and up +264,000 in a year. (The September data was revised up.) Meanwhile part-time positions fell. Some of this data is not exceptional compared with prior months but it was above expectations, and expectations count in market reactions. The Aussie dollar rose on the data. (New Zealand's September unemployment rate was 4.6%.)

RENTAL STRESS UP
Trade Me Property is claiming that the residential rental stock available has halved in the past year and demand from tenants is outstripping supply. They say it will be increasingly hard to find a place and prices will rise. Their data for Auckland shows offered rental volumes have dropped by -35% since last October and prices are rising.

NZ THE EASIEST COUNTRY TO DO BUSINESS IN
MBIE’s “business integrity services” general manager Ross van der Schyff is trumpeting NZ claiming, for the second straight year, top spot in the World Bank’s ease of doing business rankings. He notes one of the measures within the overall ease of doing business ranking is time and cost of starting a business, in which NZ has been ranked top for a decade. Van der Schyff is “very proud” of this and it’s great for the bulk of people who start NZ companies for legitimate purposes. However, the ease of setting up a company in NZ is also well known among some criminal elements around the world, who continue to exploit it.

LAGGING INDICATOR?
The latest Auckland Council valuation data is about to be released. Overall Auckland residential properties show an average gain in rateable value of +45% over the 2014-2017 period, according to latest official Council valuations. Lifestyle gains average +57%. These valuations affect how the whole rates bill is shared between properties, not how much rates will rise. However it is clear that properties in South Auckland will be paying a much larger share in future.

BACKFLIP?
Having committed yesterday to 'fixing" the GST issue with offshore online purchases, Stuart Nash has backed off today, under pressure from his finance minister. Retailer enthusiasm has turned to confusion over the apparent backflip. See video below.

WHOLESALE RATES DOWN
Swap rates fell another -3 to -4 bps across the curve today. That puts the short end (2, 3 years) back to levels we had at the start of the month, and the long end (4, 5, 10 years) back to the start of September. The 90 day bank bill rate is unchanged at 1.94%.

NZ DOLLAR SLIPS, BITCOIN RISES
The NZ dollar is slipped on the release of the Aussie jobs data. It is now at 68.6 USc. On the cross rates we are softer as well at 90.4 AUc and at 58.2 euro cents. The TWI-5 is now at 71.7. The bitcoin price is on the rise again booking a good gain to US$7,154, up +5.5% on the day.

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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20 Comments

by sharetrader | 16th Nov 17, 4:18pm 1510802336

of course he had to backflip, as soon as the customs CEO put out his had for about the extra millions and a couple of hundred extra staff to implement this policy.
not to mention the extra staff that would be required by the freight companies there goes cutting back on immigration.
there is a lot lot more to it than just charging 15% on the sale

by JB | 16th Nov 17, 6:14pm 1510809271

Can't see why this can't be captured via credit card system or IMT's to non NZ $ purchases in addition to the obvious biggies that will become GST registered with a bit of shoving and hissing.

Will be a few wrinkles but as we are getting zip now - doesn't have to be perfect.

by sharetrader | 17th Nov 17, 12:33am 1510832000

because every item coming into NZ has to have a customs clearance done, to speed up the process and manage the workload NZ customs does not worry about the thousands upon thousands of small items and have set a n amount so they can pass through the system and not slow up the delivery for not just those parcels but all the other freight that needs to be processed.
the minute you do away with that you increase the workload for many many people from NZ customs to freight companies.
that cost will need to be passed on to all, so for every dollar collected there will need to be money deducted to process it
this is a minister that has no idea of the process of goods entering NZ and how GST is collected, and this is the reason national backed away from the same idea

https://www.customs.govt.nz/personal/online-shopping/

Customs clearance

You may see that your item is waiting for Customs clearance.

This doesn’t mean that we are holding it. Another organisation we’ve licensed will be holding it instead. These organisations include Ministry for Primary Industries, NZ Post, airlines and transport/freight companies.

The organisation holding your item is responsible for contacting you when it arrives in NZ. They will tell you whether you:
◾need to pay GST and Customs duties on the item, or
◾need to arrange clearance, or
◾need to give them more information
Note: We don’t hold your item when it arrives in NZ. We can’t notify you when it arrives, and we can’t locate it for you. That is up to the company who sent/transported the item for you.

If the company transporting your item doesn’t arrange import entry documentation with please contact us – we can then tell you what you must do

by Narrabeen Boy | 16th Nov 17, 4:23pm 1510802617

unintended consequences of the lvrs?rentals are becoming more scarce.lodge real estate in Hamilton has 99/pc occupancy.will rents follow?

by Stephen Hulme | 16th Nov 17, 4:34pm 1510803273

For Japanese buyers who use swaps to shield their returns from currency swings, the yield on 10-year Treasuries fell as much as 12 basis points Wednesday to 0.24 percent, the lowest in more than a year. It sparks flashbacks of mid-2016, when hedging costs got so steep -- and U.S. rates so low -- that Treasury yields fell below zero for yen-based investors for the first time since the financial crisis. Read more

by Yvil | 16th Nov 17, 6:39pm 1510810784

"Trade Me Property is claiming that the residential rental stock available has halved in the past year and demand from tenants is outstripping supply. They say it will be increasingly hard to find a place and prices will rise. Their data for Auckland shows offered rental volumes have dropped by -35% since last October and prices are rising."

1) a halving of rental stock is a massive drop, if true
2) notice that the rental volume on offer has dropped since the introduction of the 40% LVR for investors... many commentators on this site naively thought it would lead to higher ownership... it seems the logical effect is less rentals on offer leading to higher rents

by Factboy | 16th Nov 17, 6:49pm 1510811349

Oh come on. A house is a house, no matter whether it's a rental or owner occupied. So if it isn't rented, it's being occupied by it's owner. OR it's left vacant by someone with more money than sense, and all too often that is someone from overseas taking full advantage of our crazy tax laws on housing (and quite probably illegal ?? money that they don't want to bring attention to by renting it out).
So a vacancy tax or similar will resolve that.
Houses don't disappear when speculators stop buying them/ rentals.

by Yvil | 16th Nov 17, 7:03pm 1510812213

Here's a fact, Factboy: the amount of rental houses have substantially reduced since the introduction of the 40% LVR for investors. Fact

by BadRobot | 16th Nov 17, 7:12pm 1510812729

While that may be a "fact" it doesn't mean that the introduction of the 40% LVR has caused the reduction in rentals. Cause v's association.

by bw | 16th Nov 17, 7:30pm 1510813808

...and the number of house For Sale is up. Ergo: Landlords are turfing their tenants out; not re-listing as Rentals and hoping to flick the ex-rental on quick-smart after a quick do-up.
It wouldn't be unusual for that to happen....just before a sharp decline in prices. ( This mirrors the UK scene the time before last, and the last time that the market hit the skids. No doubt it will happen there again this time?)

by Cowpat | 16th Nov 17, 7:50pm 1510815018

Yvil , you are not stating fact. You are giving your opinion. Could you reason why rental houses have substantially reduced and the evidence for your opinion

by BadRobot | 16th Nov 17, 7:10pm 1510812606

That's curious because here is a quote from NewstalkZB

"Christchurch has 59 per cent fewer rentals last month compared to October last year. The median rent fell 1.3 per cent annually to $395/week."

http://www.newstalkzb.co.nz/news/business/rents-to-rise-as-rental-stock…

Currently there are 1549 properties for rent in Christchurch and while there has been a reduction in the number of rentals offered - rent is still dropping. As I noted in another thread the number of houses for sale in Christchurch has increased dramatically (and a fair number are empty).

by J.C. | 16th Nov 17, 8:26pm 1510817197

The old "rents to rise" scare tactic from the property-related vested interest groups. Let's assume that their prediction is true. What it really means is that more will be sucked from consumer spending, which ultimately is detrimental to the economy. People spend less, then businesses go to the wall. Some may even have to sell their homes. Less consumer spending means less ability to generate profit.

The above is a core reason why rent increases are constrained, most likely for those rents that occupy the space +/- 1 SD from the mean.

by Yankiwi | 16th Nov 17, 10:17pm 1510823866

I find it a bit amusing that some people are claiming that the rental stock available numbers are equivalent to the rental listing numbers on trademe. It is important to note that trademe has recently increased their listing
charge rates. It is also important to understand that the listing numbers on a single site may not be representative of the total listing numbers. There may be a ratio of listing numbers on a particular site to a the total number of available listings. One has to recognize that this ratio may change with respect to time. A rather large factor may be the cost to list on a site such as trademe... When a site increases their rates, one would expect a corresponding decrease in the listing numbers.

by Stephen Hulme | 16th Nov 17, 7:04pm 1510812248

In Australia, their unemployment rate has tumbled to more than a five-year low in October, now to 5.1% (although most other reports will show the seasonally adjusted rate of 5.4%), amid a bigger-than-expected jump in full-time positions.

Hmmmm....

As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble. Read more

by bw | 16th Nov 17, 7:24pm 1510813464

"Xero CEO Rod Drury selling $85m stake"

As you'd say....Hmmm...!

by Retired-Poppy | 16th Nov 17, 7:55pm 1510815330

Thanks Stephen, a very interesting read. It could all unravel at any time!

by Andrewj | 16th Nov 17, 7:52pm 1510815129

https://www.michaelwest.com.au/david-cay-johnston-trumps-ua-ways-fix-di…

by fat pat | 16th Nov 17, 10:59pm 1510826349

Anyone see this fantastic article about the Australian economy, mining sector and housing market. Its well referenced, and very relevant to New Zealand on multiple levels.

http://www.zerohedge.com/news/2017-11-15/why-australias-economy-house-c…

some of the bombshell figures:

In 2015–16 there were 40,149 residential real estate applications from foreigners valued at over $72 billion in the latest data by FIRB. This is up 244% by count and 320% by value from just three years before.

Even more shocking, in the month of January 2017, the number of first home buyers in the whole of New South Wales was 1,029?—?the lowest level since mortgage rates peaked in the 1990s. Half of those first home buyers rely upon their parents for equity.

......more...

Federal MP Michael Sukkar, Assistant Minister to the Treasurer, says surprisingly that getting a “highly paid job” is the “first step” to owning a home. Perhaps Mr Sukkar is talking about his job, which pays a base salary of $199,040 a year. On this salary, the Commonwealth Bank would allow you to just borrow enough- $1,282,000 to be precise- to buy the average home, but only provided that you have no expenses on a regular basis, such as food. So the Assistant Minister to the Treasurer can’t really afford to buy the average house, unless he tells a porky on his loan application form.

Digital Finance Analytics estimated in a October 2017 report that 910,000 households are now estimated to be in mortgage stress where net income does not covering ongoing costs. This has skyrocketed up 50% in less than a year and now represents 29.2% of all households in Australia.

by bw | 17th Nov 17, 7:35am 1510857322

"Zimbabwe army chief's trip to China last week raises questions about the coup...“China and Zimbabwe are all-weather friends,” the head of the Zimbabwe Defence Forces" "