A review of things you need to know before you go home on Monday; big mortgage rate cuts, B&T rates rise as do dropouts, commodities lower, car sales leap, bank behaviour critiqued, swaps up, NZD holds

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

MORTGAGE RATE CHANGES
Kiwibank launched a hot new 4.05% fixed one year rate. That follows rate cuts from TSB. Later today, TSB then changed their one year rate lower again to match Kiwibank.

TERM DEPOSIT RATE CHANGES
None here today.

SALES RISE BUT SO DO DROPOUTS
Dominant agency Barfoot & Thompson's October sales point to a reasonably busy summer housing market in Auckland with both prices and volumes higher in October. They now have 22.1 weeks of inventory which is lower than the 2018 average of 23.9 weeks, and lower than the 2017 average of 24.7 weeks. Barfoot's drop-out rate however blipped up to 18.4% in October. The drop-our rate measures the level of listings that never sold and are no longer listed. The average in 2018 has been 13.4% and in 2017 it was 17.7%. Barfoots now have 4,848 listings, the highest level since February 2012. It's a buyers market where buyers are willing to pay.

COMMODITIES LOWER
The ANZ World Commodity Price Index fell for a fifth consecutive month, down -2.4% month-on-month in October. The drop was identical to the monthly fall recorded in September. The annual decline of -5.6% year-on-year is the weakest since mid-2016. The index was driven down by weaker prices for most commodities. The exception was for aluminium. In New Zealand dollars, the declines weren't as steep.

SUVs & PICKUPS LEAVE EVs IN THE DUST
New car sales leapt to 11,767 a new all-time high for any month. Sixty percent were SUVs, and the smaller versions were especially popular. Commercial vehicle sales were also strong but not a record.

'PULL YOUR SOCKS UP'
New Zealand's two banking regulators have been assessing bank culture and practices here in light of the findings by the Australian Hayne inquiry. They report bank conduct and culture problems are not widespread in NZ, but they highlight a culture of banks acting in their own, not customers', interests. More details are here. What can be done about what they found it is here. And what they say about banker pay is here.

ASKING CUSTOMERS ABOUT BANK CONDUCT & CULTURE
The reviewers released results of a survey of 2005 people who were asked questions about their bank. This survey formed part of the basis of their conclusions. You can read it here. But is does have some odd elements. 56% of those surveyed claim to have had a face-to-face connection with their bank. That seems wildly skewed away from the general population, the vast majority of who won't have walked into a bank branch in the past year. The survey responses to customer perceptions about 'trust' are odd as well but consistent with this type of survey in other areas; customers trust 'their bank' but don't trust banks in general. It's a bit like survey results about members of parliament; they like their own MP but diss all MPs as unlikeable. Or they universally claim to be good drivers but say more than half of all drivers are shockers. Hard to know how seriously to take this customer survey on banks. But it was one important thread in the regulator review of banks. (You do wonder what the same people would say about the regulstors.)

REFORM BY INCREASING COMPLEXITY
In Australia, the NSW government will deliver a tax break to future home buyers that will grow over time, cutting the average amount of stamp duty per property transaction by indexing stamp duty to eliminate bracket creep. Currently they levy stamp duties at the rate of 4.5% of the purchase price and higher for homes over AU$1 mln and even higher at 5% over AU$3 mln. The new bracket creep adjustments will not apply to investors. Although hailed as a major reform, it will make their stamp duty regime even more complex, and will open it up to even further gaming opportunities.

BORROWING TO PAY THE GROCERIES
Fonterra says it's considering a bond offer to raise up to $150 million that will be used 'for general corporate purposes'.

CHORUS TO GO TO BOND MARKET TOO
Chorus also says it is considering making an offer of up to $300 mln (with the ability to accept over subscriptions at Chorus’ discretion) of ten year unsecured, unsubordinated, re-setting fixed rate bonds.

SWAP RATES RISE & STEEPEN
Swap rates are up strongly and steepened today. The two year is up by another +3 bps to its highest level in more than three months, the five year is up +4 bps and the ten year is up +5 bps. The UST 10yr yield has softened a little from this morning but is holding its higher level at 3.21%. The UST 2-10 curve has widened to +30 bps. Other benchmark bond rates are still firming too. The Aussie Govt 10yr is at 2.73% (up +3 bps today), the China Govt 10yr is up +1 bp at 3.55%, while the NZ Govt 10 yr is at 2.66% and up another +4 bps. The 90 day bank bill rate is unchanged at 1.94%.

BITCOIN STABLE
The bitcoin price is up marginally to US$6,443 and little changed since this morning.

NZD HOLDING HIGHER
The NZD is holding at just under its weekend level at 66.4 USc. On the cross rates we are holding higher as well at 92.3 AUc, and at 58.3 euro cents. That puts the TWI-5 at just on 70.8.

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20 Comments

Here's the real 'drop out rate' for the B & T. Sales and Listings numbers showing a failure rate of 40.3% of all listings since March 1st.
Barfoot & Thompson Figures.
March 1689 new listings, 1064 sales
April 1358 new listings, 731 sales
May 1455 new listings, 1027 sales
June 1210 new listings, 903 sales
July 1057 new listings, 830 sales
August 1331 new listings, 795 sales.
September 1709 listings, 722 sales
October 2046 Listings, 884 sales

So 11,855 New Listings since March 1st and Sales of 6956
Total stock at end of Feb = 4648 Total Stock at end of September = 4848.
So stock that's been available since March 1st = 11,855 - 200 (difference between total stock at end of Feb to today) = 11,655 Total New Listings available.

6956 Sales / 11,655 Total available stock = 59.7% sales rate. Or 40.3% of the market is failing to sell and being withdrawn from sale. That's an expensive marketing adventure for all the failures!

I disagree. You should only measure and report what drops out in a standard period (week, month, quarter, year), and compare that with what drops out in other similar periods/months. Cumulating them up as above will make month-on-month comparisons distorted.

I think we can agree to disagree on this.

My cumulative assessment is the most transparent measure of the real success rate for sellers. From a consumer protection perspective, I think that it is really important that sellers know the truth, because they are the ones that are investing thousands of dollars to market their homes. Failed auctions, failed marketing still sees the agents get paid and if there is more transparency of reality then at least consumers go to the market better informed about their chances of success or failure. For many sellers it will then take several months to save the money to attempt to sell again, while the agents profit from the costs of a failed attempt.

I agree nic, I've been following your comments for some time, and I appreciate very much what you share. It seems like info for the under dogs if you like, and I'm all for that. Keep at it :)

Thanks Theclap123. I'm trying to shed a bit of light on the 'information gap' that is hidden from the populous., who are all too busy paying the rent or the mortgage to find this stuff out for themselves... You can be sure that the banks and real estate industry don't want people to get a true understanding of real facts and the media and politicians are themselves in the pockets of these industries, shall we say that they have 'sold out to the highest bidders!'

Failed auctions, failed marketing still sees the agents get paid and if there is more transparency of reality then at least consumers go to the market better informed about their chances of success or failure.

I think you're looking at a failed business model. It may sound like resorting to cliche, but the real estate industry is in a severe need for disruption. Even in the property management space (CBRE, Savills, etc), there is plenty of opportunity to offer a better service through better use of technology.

JC.

100% knackered, inefficient and failing to deliver for most employees (except they aren't employed), If barfoot sold 800 houses this month more than half of their 1700 sales team failed to sell a single property. The customer also suffers (exorbitant fees) and poor information because most of the agents are not experts, they are part time..... I could go on for weeks about this topic.... but will spare you all for now!
The only people who do well out of it will be the top 2-5% of agents and the business owners.

One quick solution is to ban contracting and make the business owners have to pay a basic wage to all fee earning staff and then add commissions to the successful. The bad agents that don't work will quickly get removed from the industry by the business owners who will then be far more involved in the practices and conduct of their staff.

Nic

National unsold housing stock (realestate.co.nz) has risen from 35,713 on 23rd October (Day of the FBB) to 36,587 today. A rise of 2.4% in a little under 2 weeks
Auckland Unsold housing stock (realestate.co.nz) has risen from 13,440 on 23rd October to 13,795 today, A rise of 2.6%.
Auckland rental stock (Tradme) has risen too from 4,050 listings on 13th October to 4255 today. A rise in availability of 5%.

We would all like a bit of scandal and wrong doings to keep us all excited and morally offended.
Unfortunately, in reality the FMA/RBNZ report really didn't provide us with this today.

Project fear fail. "UNCTAD (United Nations Conference on Trade and Development) showed that during the first six months of 2018, only China secured more inward investment into their country than the UK.

According to the UN, China secured $70billion, the UK $65.5billion and the US $46.5billion. The Netherlands and Spain were the only other EU countries in the top ten."
https://www.thesun.co.uk/news/7653294/foreign-investors-brexit-liam-fox-...

Well, who would have thunk?

You have to wonder Andrew if some sort of meltdown would be desireable in terms of stopping the benefits that mobility of capital have in a modern world being abused in this way.

Yes, MSM are very selective about their airings, which are more akin to views as opposed to news. I kid you not, it's bloody hard to find out what's really going out there. Most media are just middlemen. Or middle women, of course. Certainly the best tech in my lifetime is the internet, there's no doubt about that. Without it, this site (& many others like it) wouldn't even exist.

“In Australia, the NSW government will deliver a tax break to future home buyers that will grow over time,” After looking at AU’s history of house prices due to purchasing there, I noted that every time the housing market went slightly flat/down the introduced something to spur buyers on. Do politicians think debt can grow forever? Do they realise what’s they are doing to future generations?

In answer, the banks are 'apathetic' towards people and society, whilst the politicians are ignorant of the realities of banking and credit creation.. But if you were to compare IQ levels of top bankers and top politicians it is very easy to understand how politicians are manipulated by their masters.
I have said if before but it's worth repeating, 'Greenspan killed 'Moral Hazard and Bernanke hid the body.' The dot-com bust should have led to a reasonable sized recession, as we saw in the 1930's after a decade of enthusiasm (largely driven by the exuberance of the automobile era), and previously the 1870's (railway and steam bubble) and prior to that 1830's (South Sea Bubble). The Dot-com bubble should have been allowed to unwind, instead we had lowering rates by Greenspan and a digital age of 'money creation,' Faster transmission and a multiplier effect on credit creation.
The next bubble then got so big that by the time the 'subprime crisis' arrived the fear of real damage in the economy was deemed too great - Great Depression Scenario- solution, more credit creation, this time by Central banks as well as the private banks. Now we have the 'everything bubble' and it's worldwide, this time there don't appear to be any answers and politicians continue to be at the end of the bankers whip.

Agreed, I wish there was a a political party who was pushing to end credit creation. Maybe I should just pull finger and try and do something myself about it.

You and me both.