A review of things you need to know before you go home on Friday; big mortgage rate drops, home ownership slips again, gold's slip from the mainstream, Japan's retail sales jump; swaps stable; NZD waivers

A review of things you need to know before you go home on Friday; big mortgage rate drops, home ownership slips again, gold's slip from the mainstream, Japan's retail sales jump; swaps stable; NZD waivers

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

MORTGAGE RATE CHANGES
HSBC brought back its 3.85% mortgage rate, offering it for both 1yr and 18mth fixed terms. ASB cut two fixed rates.

TERM DEPOSIT RATE CHANGES
No changes here today.

RENTAL NATION
Official estimates out today from Stats NZ show that home ownership dropped below 62.5% for the first time. Five years ago it was 64.5%, ten years ago it was 66%, and 25 years ago it was over 72%. The total number of new dwellings grew just +1.5% in the year to September and that compares with a population growth of +1.9% and a growth in the number of households of +1.3%. Households are getting bigger, this suggests. This data also suggests that only just over a third of the increase in the number of dwellings became owner-occupied, the rest rented. Clearly that won't be the case for new-builds which are the only way new dwellings get added. But it does suggest just how fast existing housing stock is being converted into rental accommodation. The amount of rented dwellings rose at twice the rate the housing stock increased and there are now 634,000 rented dwellings. (And on top of that, there another 70,000 dwellings occupied by people not paying any rent and who don't own them.)

GOLD ACTIVITY
Earlier today we reported that exchange traded funds are selling out of gold. In the five months since May, they have quit -155 tonnes. One reason will be that they are taking big losses; that May inventory was worth almost US$9 bln less by September, even without the intervening selldowns. Now we can report that "central banks" are increasing their holdings of gold. In the first six months of 2018 they have added almost +200 tonnes. But what is striking is that almost all of it is being bought by dictators. Russia accounted for more than 65% of this buying, Turkey for more than 20%, and Kazakhstan for 12%. For the rest, the sellers equalled the buyers. So it is not really "central banks" that are buying, it is strongman leaders looking to avoid the consequences of their policies. Gold as the ultimate in money laundering.

CENTREPORT GETS INSURANCE PAYOUT FOR EX-BNZ BUILDING & OTHERS
Wellington's CentrePort has received a $170 million insurance settlement for the former BNZ building, Statistics House and Shed 35, plus repairs to Customhouse, Shed 39 and other properties. The former BNZ Harbour Quays building, completed in 2009, was first damaged by an earthquake in 2013. At that time 1,200 BNZ staff were based in the building which is now set for demolition. The building was damaged again in the 2016 Kaikoura earthquake and has been vacant ever since. BNZ terminated its lease on the building in March this year.

THE JAPANESE FINALLY OPEN THEIR WALLETS
And there has been quite a surprise in Japan today. Household spending jumped +2.8% in August at the fastest annual pace in three years as bigger bonuses boosted consumption. This was way above market expectations for a -0.1% fall. And don't forget, Japan has had some rough weather and earthquakes. Many analysts thought all that would dampen household spending.

AUSSIE RETAIL SALES OK
The Aussies posted retail sales up +2.6% in the year to August and marginally better than for the year to July. This data also beat expectations. NSW, Victoria and SA all did better (as did Tasmania), but the other states were a drag, especially WA which recorded a -0.5% decline.

CHINA WATCH
The Hong Kong stock market is down another -1% in early trade today. That is almost -7% during China's Golden Week holiday. Brace yourself for a bumpy Monday in Shanghai. It could be ugly.

SWAP RATES ON HOLD
Swap rates are unchanged today. The UST 10yr got as high as 3.22% although it is back at 3.20% now, with the UST 2-10 curve pushing up to +32 bps. The Aussie Govt 10yr is at 2.72% (unchanged), the China Govt 10yr is at 3.67% (unchanged given it is a holiday week there), while the NZ Govt 10 yr is at 2.63%, and down -2 bps. The 90 day bank bill rate is down -1 bp at 1.89%.

BITCOIN LITTLE CHANGED
The bitcoin price is unchanged from this time yesterday at US$6,580.

NZD SOFT
The NZD is little changed today at 64.7 USc and recovering from a bit lower earlier in the day. On the cross rates we are also little changed at 91.6 AUc, and 56.2 euro cents. The TWI-5 is lower at 69.

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51 Comments

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"there's another 70,000 dwellings occupied by people not paying any rent and who don't own them"

Can you please elaborate David, not owners, not renters? Who provides them with free accommodation?

Basically, I don't know. Perhaps other readers do. I suspect this includes accommodation farmers may supply their workers/families, some construction firms supply fo remote workers, in fact any employer who requires employees to work remotely for some time. Perhaps it also includes family members living in houses owned by trusts (?)

Kids living in houses owned by their parents?

Would holiday homes also be included in this. Neither rented nor the families main occupied dwelling?

trusts, plenty of people now have there home owned by a family trust

All those elderly parents of immigrants, who the kids brought over and parked in a house while they get on with their lives, their "duty" done and dusted.

Bingo

Chinese Students, Fruit pickers and factory processing workers? Sorry I mean essential skilled workers!

Yeah, essential skilled workers. Like 2 dollar merchandise mongers.

"The total number of new dwellings grew just +1.5% in the year to September and that compares with a population growth of +1.9% and a growth in the number of households of +1.3%. Households are getting bigger, this suggests. This data also suggests that only just over a third of the increase in the number of dwellings became owner-occupied, the rest rented."

I don't quite get these numbers, David or anyone else can you please help me understand. Thanks

Dwellings are not households

Yes, and how do you conclude that:

"Households are getting bigger, this suggests. This data also suggests that only just over a third of the increase in the number of dwellings became owner-occupied, the rest rented."

from that?

Well, if the number if people is growing faster than the number of dwellings, then there must be more people in each dwelling/household. Or a massive increase in the number of people not in dwellings.

As for the proportion of houses becoming rentals.. look at the data in the link.

Or the increase in homelessness isn’t a myth.

Definitely not a myth, one stroll thru the CBD in Auckland or just generally going about life with your eyes open will confirm that. but I don't think the number of rough sleepers has increased anywhere near enough to absorb that many extra people.

Official estimates out today from Stats NZ show that home ownership dropped below 62.5% for the first time. Five years ago it was 64.5%, ten years ago it was 66%, and 25 years ago it was over 72%.

When the nation's focus changes from a goal of helping hardworking folk on average wages into home ownership, to an ideologically-driven abandonment of such efforts and a change of the housing stock into a vehicle for investment.

10
up

and the cost to the government will rise year on year until they figure it out,
we are already over 2 billion for accommodation supplements is this the new super ?

Accommodation supplements are available to Super recipients and will come to be a huge cost down the track.

Future Super projections do not include this additional payment.

As Adam Smith pointed out in the 18th century - home ownership is critical for many aspects of a stable society.

Have we learnt nothing in the intervening period ?

"Stats NZ show that home ownership dropped"
Sadly with continuing declining home ownership we may be witnessing a cultural shift. Owning one's own home has always been an aspiration and form of security for most middle - and even lower - socioeconomic class Kiwis but this may not be the future for a growing number of young people.
While house prices currently make affordability out of the reach of many FHB, even if there is some price correction, the affordability outlook looks bleak with the likelihood of future increasing mortgage interest rates.
If this is so, then it is very sad.

That's the choice my generation faces - get sad and rent in NZ all your life, or get moving. I hope I can bring other kiwi millennials to my way of thinking.

saving4AUhouse
It is sad that you actually consider leaving NZ - as a nation we need the young, not to support the boomers superannuation as some will suggest, but rather to keep a dynamic country that we are. The young have so much to contribute.
Buying a house has never been easy - but it has become that more difficult. Sadly, whether you are looking at Australia or UK, housing affordability doesn't seem that much better. In many so called developed European countries - e.g. Switzerland - renting for life is, and has been, the norm.
The issue regarding house prices seems a little more complex than the significant house price inflation of the past decade rapid fueled by cheap finance; land pressures in our generous "quarter acre section" has most likely place pressure on land availability and therefore prices, very high levels of immigration, more demanding planning requirements, shortages of tradesmen (especially during the Canterbury rebuild), and typically larger sized homes are probably factors that have likely to have also driven affordability issues.
There is a need for central government t really address the issue - KiwiBuild is a simplistic and I dont think will be a very effective solution to helping FHBs. (For one thing, KiiwiBuild falls well short of addressing current immigration housing demands let alone addressing the current needs),

Well that's very nice of you to say printer8, but not only have I considered it I have made up my mind, and it's been a load off my shoulders.

Unfortunately Australia suffers under the same superannuation ponzi scheme - an every growing percentage of pensioners being given ever shrinking benefits by an ever-tax increasing government. The difference there is, with my single income I'll be able to afford a house in somewhere like Brisbane. In NZ, I'd be able to afford somewhere like Hamilton. A town of 165,000 vs a city of 2.4 million. Australias real estate situation is still bad, but that choice is a pretty easy one.

Hi saving4AUhouse
You clearly have initiative so this is a loss. As Muldoon once said; "Every NZder leaving the country for Australia reduces the IQ of NZ but improves the IQ of Australia" and there is some truth in that as migrations tend to be selective in that it is usually is the better skilled with initiative who migrate.
However, I think it is great in some ways that you are going and I encourage all young to travel for the experience that it brings. Prior to retirement I was involved in employing people; a person who has traveled has a broader view of things and tends to have more sound thinking skills.
I suggest you focus on the positive - the opportunities and great experience that you are going to have - and less on the push factors. Maybe one day you will be back much richer for it - and I am not talking just monetary.

I'm pretty sure Muldoon said it improves the IQ of both countries. I don't think his comment reflects reality for NZ these days. The fact is, you can't work in the forefront of your field if you stay in NZ, and Aussie society is much bigger, with well funded institutions that attract top talent. Same with loads of other places overseas.

The old adage of the last few decades was that NZ is great to raise kids in, but sadly with house prices as they are, that appears to have ruined all semblance of that opportunity. Coupled with the erosion of quality in education standards, I think NZ is swiftly transforming into a bad bet for raising kids.

Why would I come back?

I mean, let's be frank - NZ identity is cheap and does not inspire loyalty. When someone who has been in the country for a few years is given a piece of paper and is just as Kiwi as I am - what does a Kiwi identity even mean? Hell, you even don't even need to be a citizen to be a New Zealander apparently. The so called 'foreign buyer ban' doesn't include permanent residents, some of which have only been here 2 years!

NZ national identity in 2018 is cheap, freely given, and meaningless. As far as I'm concerned I'm an individual shopping around for the jurisdiction and market where can I lead the best life possible.

It would be interesting to see any home ownership stats (if they exist) for under-30s and under-40s compared to five or ten years ago - would be very telling I suspect.

Yep, I suspect the damage is concentrated in the 30-40 age bracket.

YoungTel and fat pat,
I agree totally with you; buying a house has always been difficult and required a commitment, but affordability has become a significant issue over the past decade and so will most likely affect those in the younger age cohort.
Read my full comment above. The affordability issue has been most likely fueled by a number of factors and I don't think the government's KiwiBuild either identifies the causes or addresses the issue.

Back to 65cents to the NZ dollar last time March 2016.
MARCH 2016 - FED rate 0.36%, RBNZ rate 2.25% (March 2016 was lowered) Exchange rate 0.66-0.68 currency band(and strengthening), Oil Price US $30-$35 dollars per barrel. Pump Price AKL $1.74 per litre
OCTOBER 2018 - Fed rate 2.26%, RBNZ rate 1.75%, Exchange rate 0.65-0.67 band (and weakening), Oil Price US$75-$80, Pump price AKL $2.49 per litre

100 words limit is a pain, as it levels the field with the FOES that only have 100 word vocabularies!!! But big consumer inflation is just around the corner.

Crazy huh

Hard to think there’s no inflationary impact there – although Mr Orr may well decide to look through those impacts that are outside his jurisdiction’s control – and instead focus on his new found friend “growth” (at what cost?).

But I would suggest he does have some say in the exchange rate – via interest rate settings and heaven forbid market intervention – the latter probably being somewhat and perhaps ultimately futile.

I agree. It’s caused by low interest rates so hardly outside his jurisdiction.

And will have a bigger impact on the poor and fixed income retirees with inadequate pension provision, than it is on the speculators still benefitting from housing support and negative gearing... I thought Q3 2019 was when they'd have to go up, but I think there is a 50/50 that it will be sooner than that, particularly if Oil keeps climbing as the NZ dollar weakens further and the FED keeps raising rates. Tightening into a recession is not a particularly great place to find ourselves.

I agree. It’s caused by low interest rates so hardly outside his jurisdiction.

Ripple-powered payments app MoneyTap has now gone live, according to an official tweet October 3. The consumer-focused service was co-developed by Ripple and Japanese financial services giant SBI Holdings.

According to the product’s website, MoneyTap will use Ripple’s blockchain solution xCurrent to enable domestic bank-to-bank transfers in “real time.” Account holders at three participating Japanese banks – SBI Sumishin Net Bank, Suruga Bank and Resona Bank – can send funds using the mobile app, which is compatible with both iOS and Android devices.

https://cointelegraph.com/news/japanese-financial-giant-sbi-and-ripple-l...

And from Canada where homes are more affordable http://www.rbc.com/newsroom/_assets-custom/pdf/house-sep2018.pdf (tip of hat)

And when they last reached similar unaffordable levels in 1989 they then fell significantly for several years.

Same happened in UK 1988 - 1995

And it's all just a little bit of history repeating.

https://www.youtube.com/watch?v=0WAgPs9To-8

https://www.google.co.nz/search?q=canadian+house+prices+1985+to+1995&tbm...

Real estate NZ figures show an increase in un sold but available stock of 1.9% in one week!

Nationally the number of unsold houses has now risen from 33,728 (Friday 28th September) to 34,362 (5th October) a staggering increase of 1.9% in a week.

(This does not include all the houses that have been withdrawn after failing to sell)

There's got to be a pun about it being golden week in China.

ANZ prediction further NZ dollar fall before the end of the year to US 62 cents.

https://www.stuff.co.nz/business/money/107637408/new-zealand-dollar-head...

I still think sub 60 by Christmas as I've stated before.

Nothing too much to worry about?

The last time the New Zealand dollar hit such levels was around 2009 "when we were right in the depths of the financial crisis", Borkin said.

But New Zealand was in a very different position to what it was 10 years ago, he said.

"The currency is at these levels because the US dollar is so strong and that's quite a different dynamic to 2008-09 when the New Zealand economy was in recession," Borkin said.

Against the Australian dollar the kiwi was around 92 cents - above historical averages, he said.

"It's certainly more of a US story at the moment rather than a New Zealand one."

I wish we were winning as much as Trumps America.

Saving4.

Sit back, watch and enjoy. It's all just a bit of history repeating. 1990's though not 2008/09 and not 1970's because there will be no wage inflation

https://www.youtube.com/watch?v=0WAgPs9To-8

yep, a depreciating currency is a pay cut for everyone.

It’s a pay rise for exporters.

no it's not, thats an illusion

Oh David, Russia is not a dictatorship, keep this up and we will have to send a man around to paint your door knobs.

and if that doesn't work we will leave a second hand bottle of perfume on your lawn.

But in the land of the free things are looking up
https://www.zerohedge.com/news/2018-09-28/largest-ever-homeless-camp-sud...

70,000 people who dont own a home and dont pay rent ............. ?

I learn something new every day , and was wondering : How come I dont know about this ?

How can I get my 3 adult kids onto this scheme ?

Maybe these are people on welfare ?

Now that the NZD has set yet another lower high, followed by a lower low... time for the next obligatory Roger Kerr article about why the NZD will be moving very shortly to 0.70 to 0.75. His predictions of the imminent rise of the NZD has become rather amusing. He may eventually get it right. IMO, calling the change early is still calling it wrong. He has written articles on interest.co.nz for many months, predicting the climb of the NZD. To date every one of his predictions (and recommendations to businesses about currency hedging) has been wrong.