Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
TERM DEPOSIT RATE CHANGES
None here either.
TAILING OFF I
The average value of a New Zealand house dropped -1.6% over winter according to QV. Values are down in Auckland and Christchurch, up in Wellington. They say Auckland sellers are now 'adjusting expectations and are more open to negotiation'.
TAILING OFF II
There were 13,368 used imports sold in August, down a chunky -7.7% on the numbers sold in August 2017. That makes it seven months in a row where year-on-year sales data for this class of car has failed to match the same month last year. However, some are saying this is more of a supply-induced slowdown, with stink bugs having spread to more corners of the globe, and this being the first season where we can iron out the kinks in fumigation procedures.
GROWTH INDUSTRY
The latest update from Stats NZ on local authority revenue shows them rising at a healthy clip to June. Revenue from rates and "regulatory income" (that is, fees and fines) up +5.3% and the fastest rate of increase in years. Of course, it will rise even faster in future because the new Auckland regional fuel tax started in July. Local government will be getting revenue increases far above the growth in the economy, which may actually be slowing.
CHEAPER MONEY
Treasury today tendered $100 mln in 2040 inflation-linked bonds ("linkers") and they yielded a paltry 1.80% (plus CPI inflation). A year ago they were yielding 2.36% plus inflation. At the prior tender, it was 1.95%. Demand is healthy, with bids for $263 mln.
EVEN CHEAPER
Yesterday, we reported on an ASB bond issue, and we should note that we had an error in our summary, They were not subordinated as noted here, rather they rank equally with all other unsecured creditors ("unsecured, unsubordinated") like term deposit holders. (My error). But the low cost of 3.31% was reported accurately. Today, Toyota Finance also completed a bond deal that saw them pay 3.17% for $100 mln of five year unsecured unsubordinated Notes that are rated AA-.(same rating as ASB's issue). Car sales in New Zealand are not going to be restrained by the cost of debt.
LESS STRESS, BUT YOUNGER
Debt reporter illion (formerly Dun&Bradstreet) has been analysing New Zealand bankruptcies to a deeper degree than our own analysis. They report consumer stress is easing significantly nationwide, although there was a sharp rise among the under 25s. They show that bankruptcies (and NAPs) were down more than -11% in Auckland in the year to June, down -1% in Christchurch and down -24% in Hamilton. These are the only cities where the totals exceed 100 for the year. Their analysis shows personal bankruptcies for individuals aged between 18 and 24 years rose +67%, marking the fourth consecutive year of significant increases. In FY2014 less than 20 people in this age bracket declared bankruptcy, whereas the most recent figure for FY2018 is 207. On that basis, the under 25s now make up more than 6% of all bankruptcies, up from virtually nothing four years ago.
MORE HIKES
ANZ Australia has outdone Westpac by raising variable home loan interest rates by +16 bps. Westpac had hit their customers earlier with a +14 bps hike. And just in, CBA has announced a +15 bps hike. Most smaller Aussie banks have already moved up, so it is only the NAB yet to move. The RBA held its official rate unchanged on Tuesday. In all cases the banks are blaming "higher funding costs".
SWAP RATES LOWER
Swap rates are lower by -1 bp across the board today. The UST 10yr is up +1 bps at 2.91%. The UST 2-10 curve is now just over +25 bps. The Aussie Govt 10yr is at 2.58% (unchanged after yesterday's sharp rise), the China Govt 10yr is at 3.64% (down -1 bp), while the NZ Govt 10 yr is at 2.57%, down -1 bp. The 90 day bank bill rate is unchanged at 1.90%.
BITCOIN DROPS
The bitcoin price is at US$6,441, down -12.7% from this time yesterday.
NZD RISING
The NZD has risen back to 66.1 USc. On the cross rates we are firmer as well at 91.7 AUc, and holding at 56.7 euro cents. That puts the TWI-5 back up at 69.8.
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39 Comments
I like numbers and so will come along for the ride.
My chicken scratchings show around 10,945 Auckland listings at 31/08.
I’m now seeing 11,162 – an increase of 217.
Junk grade “investment” properties will soon, if not already, be priced accordingly – land value?
Holders of junk should probably have sold a year+ ago.
Do you mind if I ask you to put your seatbelt on Custard?
Edit.
What people often forget is that those 11,000 or so Auckland sellers are all on the market for a reason and they've made a decision that they would ideally like to sell. Price is irrelevant, whether it be debt, death, divorce these are very motivating drivers that have led them to put their houses on the market. Aspiration to trade up, aspiration to trade down are less reason but are reason nonetheless.. However, nobody ever 'has' to buy and that's where the balance of power really lies. They may want to buy, or aspire to buy, but they never have to buy (as I am finding out with some shares I'm holding at present) ... To be fair you never actually have to buy anything, other than food, you can rent pretty much everything else you need. It'll be interesting to see if the powers that control the MSM can keep persuading first time buyers that it is a good idea to prop this up as each transaction relies on the money from a previous transaction, a bit like our marginal foreign buyer starting off the chain of events that lets others have the equity to move.... FOMO or FONGO will be where the marginal buyer will set the market moving forward. Interesting times!
Ahhhh – God bless the marginal buyer:
“A term that's circulating more often is the "marginal" buyer. These are the outliers who pay huge premiums over the "consensus price" that experienced agents would come up with based on previous sales and micromarket factors. Even though they make up only a small subset of buyers, they determine market value.”
RIP 23/10/18?
RP - Bubble to Bust. A little illustration of how this pans out next.
An agent puts a house on the market and 5 buyers compete for it. It sells after a bit of competition for $800,000.
Agent puts the next similar house on market for $825,000. 4 buyers remain but 1 is already priced out of the market, so 3 buyers compete and 1 buys it for $825,000. 2 buyers remain.
Agent knows that he has 2 buyers who missed the last two houses so he puts the next similar house on for $850,000 . 2 buyers compete and 1 buys it for $860,000 (his wife said he would be in the spare bedroom if he didn't). The extra debt was worth it!
Agent then puts a fourth similar house on the market for $875,000. 1 buyer left but he has already missed out on three houses and can't let it happen again or his wife will leave him. He pays the $875,000 despite there being no competition at all. His previous experience has programmed his response to loss so he sets the top of the market..
Agent then has 5 sellers of similar houses come to him all now wanting a magical piece of the $875,000 premium that seller number 4 got. They know the market has topped and actually two have just been made redundant in cost saving exercises by their companies.
Except the trouble is that the only buyer left is the chap who bowed out on house number 1 when the bidding got to $800,000. He now just sits and watches to see which seller is ready to meet his less than $800,000 budget. He knows he has limited competition so waits as the sellers drop below $800,000, then below $750,000. He eventually buys for $680,000 because in a falling market that's all the credit the banks would give him and the seller knows that there are now 20 similar houses that he could buy instead.
Prof. Werner brilliantly explains how the banking system and financial sector really work.
https://www.youtube.com/watch?v=EC0G7pY4wRE
Thanks for sharing. This info couple with RBNZ C5 stats show the disservice the financial sector does to the NZ economy with approx. 62% of outstanding loans as of July 2018 were to household and personal consumers.
Is all this new money being created without any value addition to the overall economy the reason behind our dependence on foreign-made goods, services and capital for most of our needs?
I do often wonder how few people read my posts, I nearly stopped but interest.co is one of the few places that gives me a voice. I decided that even if only one person reads my post then perhaps its one person thinking a bit about what is really going on, 'behind the curtain' so to speak.. So if it's only you, scarfie and Advisor that read what I put up then i'm still in the game.
I also pick a lot up off you guys.
Take care Andrew
I too read, Andrew. And as you may have noticed, every now and then, throw in something to rattle the dags on the sheeple....It's always amusing to see the flocks divide into their tribal affiliations, and the chants emerge - two legs baaaad. And like you, while I have little skin in the bigger games - flipping, landlording, investing - I contract to businesses in the budgeting and BI space, so am quite aware of their current concerns. Keep up the good work.
I'll take your fine bottle of Atarangi 2007 off you, That's an unfair bet for me to make... Our tiny little economy which is smaller than the size of the Welsh economy won't have a chance of manipulating the markets with interest rates or money printing.... The RBNZ has no teeth left.
only buyer left is the chap who bowed out on house number 1 when the bidding got to $800,000...
How soon this scenario can happen.. if it's too
late, the remaining chap, would be dumped by his wife, his kids would have become inferior to their peers.. and FOMO could even psychologically affect his career too .. LOL :-)
It's true ,more properties are coming into market.. but prices are still going higher for good properties(at least in Hamilton)
Nic
Fine example of how $800k buyers might react and salutary lessons for some. I would argue that this agent mysteriously and curiously has a good supply of houses in this bracket of the market. Assumptions include all 5 buyers are sticking around this location waiting buy (wouldn't that be great). Assumptions are they are not looking in other locations, dealing with other agents or even deciding to give up and build. The desperate 4 times loser miraculously doesn't have an unsympathetic wife who just has to nest and who will terminate benefits. Assumption is the market suddenly turns and comes back 875-680= 23%. Oops I haven't seen this in NZ in my lifetime, 5% + maybe. So great story and good lessons but.......
News Flash! House prices around NZ are not dropping!
They may well be in Auckland and tauranga but around the rest of the country it is holding up very steady.
There are a lot more low to middle priced houses selling in Chch as people here just know that if they don’t buy now, then they never will be able to.
They know that Chch is developing and is going to be the city of choice over the next decade.
“The Man” has spoken, whether you say BS is irrelevant, it is the truth!
David, I crunched some of the details of the local authority revenue stats. While rates continue their steady rise the stellar performer over the last few years have been investment income and "Current grants, subsidies and donations income".
Investment includes dividends from ports and airports so it looks like councils have done well from the tourism boom (well two or three councils have).
Grants and subsidies are, of course, taxpayer money poured into councils by the government. For a while it was mainly roading subsidies but the subsidies to help smaller councils with the impacts of tourism and the Housing Infrastructure Fund are probably starting to show up now.
The regulatory income category is largely consent fees so is linked directly to the level of development, building and property sales in their areas.
Donald, as a former County Treasurer and still in the budgeting game, I have another, more cynical and sadder explanation for the Fees and Other Charges income gains.
Councils have perfected the way to shift formerly Rates Required funding, which is political kryptonite for the elected Councillors if it gets too high, into Fees and Other Charges income. Same activities, same expenses, different budget parent object.
Fools most of the ratepayers, most of the time.....
There are some atrocious practices, particularly the council War On Small Business policies. Thus a small hairdresser in Nelson pays $700 odd extra rates as a toilet tax, exactly the same as a large business with 100 staff or more, as it is done on each tenancy. So an abusive tax is applied, and then applied unfairly on the basis they can get away it. There seems to be an endless number of these unprincipled abuses of power going on.
Whats wrong with the USA?
https://www.sott.net/article/395236-The-American-Dream-has-drastically-…
Wonder how many properties are being listed by investors after the sustained attacks on them. Also how can Aussie banks be putting rates up with swap rates down and RBNZ talking about downshifts here. The NZ banks are pushing 12 month fixed terms which will pitch borrowers into higher rates if nz subsidiaries follow suit. Another reason to list if your expecting compliance costs and interest rates to increase.
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