Well, first things first. Let us start by getting over the shock that 2023 is nearly halfway through already.
So, as we are now mid-year, let's ask: How has it been so far?
Predictable is the word that comes to my mind - although maybe that sounds more than a little misleading. 'Predictable' in this instance doesn't mean good. It just means that economic developments have followed a path that was pretty-much predictable.
This year didn't look like being a good one and now half-way through we are getting the confirmation. It's not a good one.
But as to predictability, when at the end of 2022 I did my two-part preview of the year (first part here; second part here) and tried to identify likely key issues for the coming year, I name-checked the following things: the labour market, inflation, the Reserve Bank and the Official Cash Rate, recession (real or imagined), the election, migration, and the housing market (well it wouldn't be NZ if we didn't mention that).
Those subjects have all turned out to be central to the economic picture in the first six months of the year and will likely continue to be so for the rest of the year.
But there's always a wild card, isn't there?
An upside down world
Sometimes this can be an out-of-left-field global event that tips everything upside down. The emergence of the pandemic in 2020 would represent one of the worst such occurrences. Last year Putin's invasion of Ukraine tilted the global situation.
This year we've had our own domestic drama with the two big weather events in January and February. These have provided a hit to the economy that helped to propel us into a 'technical recession'. Let's be clear, our economy was heading down anyway, the weather gods just gave it a bit of a kick on the way down.
So, anyway, let's have a bit of a quick look at where we stand with some of the key economic issues.
Well 'technically' we are in recession. The March quarter GDP figures showed our economy shrank by the merest fraction, 0.1%, in the quarter, following a (downwardly revised) -0.7% figure for the December 2022 quarter.
So, we only JUST made the technical description of a recession - this being two consecutive quarters in which the economy shrank. As an aside, it would be fairly interesting if there's any revisions to the March quarter figures done by Stats NZ once the June quarter figures are released in September. (Entirely possible.) If for example that March quarter figure upon revision is just given the merest tweak up - to 0.0% then as I write this we are NOT actually in recession!
Such are the fine margins. And it all goes to show that we really should not get hung up on the 'R' word, which is just a label that in itself is fairly meaningless. But it does carry significant impact with people. What really matters though is not a label, but the extent of any slowdown in the economy. There's a world of difference between an economy shrinking 0.1% and say 3.0% in a quarter.
The concern might be though that the high levels of inbound migration we've seen in the early part of the year are in some part camouflaging how poorly the economy is going.
By Stats NZ estimates we've had a net migration increase in the 12 months to April of over 72,000 people. Such a big population boost has an impact on economic output - IE it boosts it. So, we've gone into recession despite such a boost. What this all means is our GDP on a per capita basis ain't looking flash at all.
Per capita GDP is not looking flash
ASB economists say on a per capita basis, GDP was down 1.1% in the December quarter and 0.7% in the March quarter. On the basis of disposable income per capita, they say we are looking at declines of 2.2% and 0.9% over the last two quarters. "Given it is ultimately the standard of living of each New Zealander that matters, these are key figures to keep an eye on," ASB economist Nat Keall says.
I thought we would dodge (just) a technical recession in the first half of this year. And we haven't. I expected we would get there in the second half of the year. So, we are ahead of ourselves and not in a good way.
All this while the labour market has remained hotter than a hot thing. As of the March quarter our unemployment rate was just off its record lows at 3.4%. I've said before that at the moment the labour market figures are THE key ones to watch, for a number of reasons. It is most unusual to say the least to have an economic slowdown occurring and yet retaining virtually full employment.
Full employment means that people can cope better with inflation, they can keep spending, they can meet the higher interest rate bills and so they can stay put in their houses.
When New Zealand was in a deep recession in 1991 our unemployment rate hit nearly 11% - and that just exacerbated the process of the economy grinding to a halt as people stopped spending.
The Reserve Bank is never going to admit to wanting to see people losing jobs, but in reality it DOES want to see 'slack' in the workforce simply to help take heat out of the economy, as it battles to get inflation under control.
Before the end of last year the RBNZ had forecast that in the March quarter unemployment would rise to 3.6%, so, the slowdown in the labour market is taking longer to arrive than the RBNZ had been earlier thinking/hoping. The RBNZ will want to see the labour market 'turn'. It is forecasting an unemployment rate of 4.6% by the end of this year.
That inflation beastie
So now we come to inflation, the villain of the piece, that thing the RBNZ is meant to keep on a tight leash of between 1% and 3%. It's been running amok. Inflation peaked at 7.3% in the June quarter 2022 and has proven sticky, falling just slightly to 7.2% in the September quarter and remaining at 7.2% in the December quarter. This year? The RBNZ had as of earlier this year been picking inflation to actually rise again to 7.3% in the March quarter. In reality it came in at 6.7% - some sign perhaps, at last, that the efforts to drive it down are starting to gain traction.
But those efforts on the part of the RBNZ have been to say the least strenuous. Continuing on with its 'hiking cycle' that began in October 2021 when the Official Cash Rate (OCR) was at just 0.25%, the RBNZ has so far this year added a further 125 basis-points to the OCR, taking it to 5.5% - the highest level since 2008.
The RBNZ indicated last month that it now doesn't see the OCR rising further as it is forecasting 5.5% to be the peak. That's just a forecast of course. And it can change its mind at any time. But for now it means mortgage interest rates are likely at or near peaks.
The rises in mortgage rates we've seen though have certainly had an impact. New mortgage figures are well down, with the first four months of this year seeing the slowest growth in mortgage stock since the aftermath of the Global Financial Crisis.
House prices, which fell right through last year, have continued to do so but economists reckon the end of the falls may be nigh. REINZ's National House Price Index (HPI) was, as of May, down 18% from its November 2021 peak. So far this year the HPI has dropped nearly 3.5%.
Putting this into some perspective, however, the falls we've had have only taken the HPI back to levels it was last at at the start of 2021.
And if we compare the HPI level as of May 2023 with January 2020 just prior to the start of the pandemic house market frenzy it's actually now some 20% HIGHER than it was then, even after the falls since November 2021.
Elevated housing
So, if house prices really do start to level off and then even rise again from here, well, the housing market is actually starting the next 'cycle' from a still very elevated position.
In the meantime, in the background, we've got the election looming.
I could say much more. But summing up the first half of the year, I would say it has been pretty much as expected for the economy, though if anything possibly slightly worse than I might have thought. The early onset of a 'recession' - just the very word - could be a quite significant psychological blow to a Kiwi public that I think's been showing a lot of resilience. But it's getting colder out there. And I don't just mean the approaching mid-winter weather.
For me the 'meat' of this year is going to be in the second half. That's when we will get the answers to a lot of the questions that have formed in the first half.
So, I shall be back for more, detailing what I think are the key things to look out for over the next six months. And there's a lot. Look out for that in a few days.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
163 Comments
This recession is very good news indeed. The RBNZ has stated it is trying to engineer a recession to rein in inflation.
I'm quite concerned that people just don't seem to get this. The roads and malls seem to be jam packed on the weekend. I'm doing my bit. Badly need new socks and underwear but making do with what I've got for now. Suits me as I hate shopping.
RBNZ are clueless and just hedging their bets. Saying we want a recession when one happens gives them credibility. There are allot of people with allot of money so I don’t expect inflation to cool, even if some start to slow spending. NZ is in deep now and it’s going to get ugly. However I think National might slow the decline should they get in, if not watch out below.
Of course people are spending money.
Big population numbers at the bottom of the pyramid.
Minimum wage up, increased benefits, many living in publicly supported housing so not too affected by inflation.
The redistribution of wealth is working to dumb down and disable our economy.
Dastardly dangerous dirty place looming.
You're dilusional. The misuse of drugs act 1975 has been a cash cow for gangs since 1975. Young wealthy professionals take drugs, if fact most people do - coffee and alcohol are drugs too. Most people who use drugs experience little to no harm then grow ouf of it. Drug war propoganda still works in 2023, puritanical stuff dies hard.
I was walking past a fertiliser companies stand, he was ranting about how organics were dangerous as radio-active isotopes are also natural and could therefore be considered organic. He then raised his fists at one of the guys on the stand. Really bizarre behaviour.
Not sure those 800,000 boomers taking a non-means tested benefit are at the bottom of the pile. After all they’ve ridden the greatest housing bubble in the western world at the same time slashing taxes they had to pay (retaining free transport and healthcare for themselves of course). 1 in 8 own a rental property too.
A National Government is much more likely to antagonise the RBNZ into stronger action than slow any decline. As a country, we've spent too much time and effort over the last 2 years to start a correcting our economy to throw it all away now - and the RBNZ know that.
Every politician no matter which party has own vested interests these days to be a politician or why would they do it? They are not in there to make the country better as they do not have the skin in the game.
None of the politicians are average Joe. They are all well to do and simply said in the rich and elite category.
Or if they are average, once they win the election, they get surrounded by rich and powerful. Then they only do as told or will be banished to the back benches to never be seen again to do anything good if they even wanted too.
So yes we are doomed because the intelligence and skills of politicians chosen or to be chosen is not up to the mark. They are too bitter towards each other to do anything constructive for the country.
"Seymour went to Auckland Grammar School,[2] and the University of Auckland where he graduated with a Bachelor of Engineering (Electrical & Electronic) and a Bachelor of Arts (Philosophy)."
STEM grad, should be no worries in the private sector
https://en.m.wikipedia.org/wiki/David_Seymour_(New_Zealand_politician)
Nice story - BS of course.
https://www.nzherald.co.nz/nz/politics/act-leader-david-seymours-embarr…
Yeah I'm resigned to this, unless Chippy wants to get on the blower to Raf Manji and cook something funky up in Ilam to give Labour another coalition partner choice (outside of the echo chamber that is the Interest.co.nz comment section, TOP seems to rate in the party popularity stakes between Brian Tamaki and Wilson's Parking - a cup of soy decaf in leafy Ilam could be the ticket ).
There's really nothing that inspires about National at all, but my electorate choice is the National candidate (can't even name them) or Megan Woods, and I'd rather lose the franchise than vote for her so I'll just put my tick next to the blue box and maybe I'll learn afterwards who my new MP is.
In terms of party vote, my view is that TPM is too extreme to be allowed anywhere near government. All other parties are merely indifferent to those who hold contrasting views - National and ACT don't really care for the plight of anybody who shops at Pak N Save because they have to and not by choice, Labour and Greens have zero comprehension that people have to get out of bed in the morning and undertake private enterprise (for that evil concept that is profit) in order for them to have the tax to then hand out to their most loyal voters ... but it's going to take a lot to convince me that the TPM 'mantra' is anything but utter disdain for non-Maori; except, of course, for the tax you can bleed them for in order to redistribute. Preserving the fundamentals of democracy is to me the number one determinant of where my vote will be going in October.
Do I love everything that ACT is about? Hell no. Am I enthusiastic about the prospect of Luxon as PM? Unequivocally not. I actually prefer Hipkins by a country mile. But considering the alternative - and because I don't want to waste my vote on TOP as I'm not able to vote for Raf Manji and they simply will not get 5% - I don't have much of a choice.
I might vote Nat-ACT and take a bet on their tax cuts and high net migration keeping inflation elevated for the foreseeable future. That should be enough for mortgage rates to remain unaffordable for housing speculators, despite handholding from the parties on the right.
With respect to landlording, all I personally want to see is property investment treated as a legitimate business in the sense that if you can make a profit out of it (whether that's via rental yield and/or capital gains) you can enjoy that profit but you must pay tax on it e.g. realised capital gains, and you need to operate in the same financial and regulatory environment as other businesses e.g. borrowing money at business rates or finding other ways to raise capital, but equally being able to deduct interest costs. If the numbers don't stack up, you have "nowhere to hide"(as a normal business confronted with economic reality) but equally if you can make it work, then more power - and after-tax profit - to you.
It seems to me that so much of the problem has come - aside from an era of unprecedentedly cheap debt - from the special treatment property investment has enjoyed as a sort of safe-as-houses form of investment owing to favourable regulation.
I don't care much for punishing landlords and I don't think they are all evil as the left does, nor do I wish to worship them as does the right. I just want them to operate in the same business environment I do - where if you can't "make the numbers work" then you shut up shop and go do something else.
Yes but you dont get a tax write off
Everyone boohoos about no cgt and ignores the brightline elephant in the back room
I've heard that a third of those liable actually ignore the tax. The IRS just needs to grow a pair and fine them
Anyone who bought early 2020 and before will be up, some up massively
Really, I have heard of an individual being chased…..under debatable conditions I.e. they paid when it was technically not a bright line sale but felt threatened by the IRD. House sales are definitely on the IRD hit list so you would have to be stupid to avoid it. I do think the IRD need to be more pro-active in auditing however.
Yeah this is the sort of thing that isn't a big deal, and it's silly for ACT to focus on it when they could make inroads in other areas. When was the last time you consistently managed to drive at 50/60 km/h around town anyway? The average speed on my last drive in Christchurch (admittedly on a Friday evening when the Crusaders were playing nearby). I'm a self-confessed car enthusiast but as somebody who cycles a great deal around town it's also so much nicer and safer feeling in 30 km/h traffic.
Open road speed limits I'm in two minds about. On the one hand, our roads are crap and a lot of people drive like idiots. There are probably some open roads with one lane each way and no dividers where it makes sense to drop the limit. For example they dropped it going from Christchurch to Akaroa and it honestly makes stuff all difference time-wise as you rarely got to drive at a solid 100 anyway, and you still have the same issues with getting stuck behind caravans, campers and trailer-towers on the hill (unless travelling very much at off peak times) On the other hand, I reckon you could safely do 120+ in the outside lane of the new motorway to Rolleston - if drivers had proper lane discipline.
Yeah this is the sort of thing that isn't a big deal, and it's silly for ACT to focus on it when they could make inroads in other areas
ACT know the demographics they're trying to hit, and one of them is the anti-nanny state vote. It's probably 10-15% of the population.
The thing is that the having a 50 speed limit everywhere regardless of how safe the road is is the worst kind of nanny state, it’s almost a pointless rule. If ACT think 50 is a sensible speed down our narrow suburban street, why also have 50 on much wider arterials, shouldn’t they campaign on increasing those to 100 or something?
When you are driving down a major arterial route to get across town at 10pm on a Sunday night, with no traffic around, and you are still forced to drive at 30 kmph you realise the absolute stupidity of these rules, and that they are only in force to deliberately annoy car drivers. All of the suburban streets between me and my local shopping area are now also 30 kmph, with speed bumps everywhere in case the lone suburban driver should dare go a few kms over. How many children have died on those streets when the limit was 50kmph? None. So what is the point of it all?
Apparently 1000 people are hit with cars bad enough each year that they require hospitalisation and 1 person dies every week
And LOL:
Most pedestrian deaths occur in urban areas, on roadway locations away from intersections (where higher speeds might occur), and at night.
But screw those people, vroooooom!
The problem is crap drivers though, not speed. I drive on my street at 40km mostly because it’s narrow and there are kids. But you still get twats hooning along at 60kms so lowering the limits won’t make much difference. Maybe the focus should be on driver and pedestrian education, and prosecuting people who continually break the law…..
The problem is crap drivers though
This is a physics based problem. You shouldn't need an education awareness program to tell people 2 tonnes of metal hitting 80 kilos of person isn't a great setup.
Maybe we really do need more STEM grads. Actually wait, a STEM grad is running the party that's pushing for physics defying policy changes........
“this has been the worst government ever.” - pretty sure unemployment has been lower, wages higher, and growth higher (on average) compared to the last National government. Both National and Labour were useless at infrastructure. So what makes this government worse than the last?
The number of people on JobSeeker Work Ready has increased by 54% under Labour (from 63,048 in March 2018 to 96,885 in March 2023). A 25% increase in the number of people on the single parents benefit, and a 29% increase in the number on the "Disability" benefit. The percentage of the working age population on a benefit has gone from 9.2% to 11% - the only growth Labour has overseen in 5 years is in welfare dependence and tax collection.
Oh, and growth in the number of people who simply believe the Govt propaganda and their paid media lapdogs because they've convinced you over the last few years that "thinking for yourself" makes you a white supremacist conspiracy theory nutter.
I don't know how you see National's policies slow the decline - promising tax cuts, etc. I think they've got the most disingenuous commentary I've ever heard from any National government and I hate them for it.
Regardless I'll be forced to vote for them this time round as my family need the reversal of mortgage interest deductibility. It's the heaviest financial drag on our family.
I only see interest interest deductibility being fair if you pay capital gains tax. It lets you outbid FHB's and helps turn NZ from a country of owners to one of renters.
We could let FHB's deduct mortgage interest as I think some countries do. I think life insurance was once tax deductible in NZ.
You would be totally wrong, votes are easily bought for extra money in peoples back pockets. This is not necessarily wrong as long as the money is targeted to the right people. I for one see no problem with say the Australian no tax threshold up to $18,000. This or its about time the government stopped taxing your TD income.
My 2023 predictions are coming together pretty well!
- Political
Labour/Greens/Maori party to form a coalition and lead after the election - National loses momentum when their policies start coming out, and don't appeal to middle NZ, AND Labour takes the wind out of their sales with a tax-free threshold, making the election a debate about who needs the tax cuts (voters less selfish than Nats realise)
- Economy
Recession here and abroad. Unemployment to end year around 6.5%, and will still be travelling in the wrong direction. Building industry to go tits up as noone is starting any builds, and plenty are getting finished. Multiple big construction company failures (Williams Corp & Du Val by August).
- Interest rates
RBNZ to go 75bps at first meeting, go no further as the wheels start falling off, end the year with OCR at 3%.
- Stock market
NZX50 ending year 5% above current rates, as bond yields fall, another year of no significant new listings.
- Property
Accelarating declines. Another 14% off the Index, Residential property still won't add up as an investment.
- Inflation
Ending the year at 2%, Tradeable inflation to fall off a cliff, non-tradeable to be above band, as usual.
The Govt has bailed them out with taxpayer money
https://www.nzherald.co.nz/business/property-developers-with-chequered-…
Any predictions on AI? Job layoffs could begin very soon, we’re not taking it seriously enough.
I saw a presentation from Microsoft on their AI-assisted Office copilot suite. Impressive stuff - you can ask it to create a 5-min presentation using a 5k page document and it does a fairly decent job at it.
You can also get it to build complex financial models in minutes using project files (contracts, emails, speech-to-text conversations on Teams, previous models) that takes a team of well-paid analysts weeks to come up with. All you need is probably a day or 2 to tweak it yourself after that with the copilot’s help.
Anecdotal I know, but I've got a few clients and business associates who have started using AI tools to replace positions like content creators (for website product listings, newsletters, social media content etc) and even some administrative functions as a cheap overseas freelancer + AI tools can achieve the same.
Not an NZ example, but I know someone who runs a web writing service - you go along and say "I'd like content for a website on this topic" or "I'd like 12 months' worth of email newsletters written about dog training" and he had an army of native English speaking writers in USA, UK, Canada, NZ, AU etc who would then fulfil that work at a piecemeal rate. Depending on output and location (many of them are expats or digital nomads based in low CoL countries e.g. Thailand) there was a decent living to be had with minimal stress as the writers never needed to find clients of their own, just fulfil the work as it comes.
However, because the company's clients can instead get content from AI tools that ranges from nearly-as-good through to superior - but for a massively reduced cost - he's had to let every single one of the writers go (over 100 of them) and instead pivot to effectively acting as a middleman for AI writing tools, using lower paid outsourcers instead.
Chances are none of those writers will be able to pick up much of the same sort of work again.
I'm also starting to encounter numerous instances of businesses unknowingly purchasing AI-generated output (only finding out when they push the supplier for an answer) - some of it is great but the issue is that the business can ultimately cut out the middleman in most instances, meaning all the ancillary jobs e.g. account managers, admin, CS etc are at risk.
John Mauldin looks to have it about right.
For better or worse, the Fed seems bent on getting real interest rates firmly into positive territory. One could argue this will ultimately be for the better, short-term pain notwithstanding.
And his reminder of Bagehot a quotation is appropriate:
“Whenever money becomes very cheap, experience teaches us to expect that it will be misspent. (Society) cannot stand two per cent (for the cost of Debt). The particular form of mania differs in various years; but when the common and tried employments of money yield but a low profit, recourse will be had to new and untried ones, some of which will be unprofitable, and a few of which will be absurd. It is only at the outset of such manias that warning is of the least use — when they attain a certain growth, advice is thrown away. Everybody is seen speculating; and what everyone does must be judicious. Foolish person No. 2 imitates foolish person No. 1.”
Strap the RBNZ onto The Fed, and don't expect any fall in the OCR until Real Interest Rates are positive. And in the meantime, if CPI keep rising, so will the OCR.
The RBNZ is fairly impotent.
was thinking about this this morning. Lots of people have been getting significant wage rises. Many of those people are boomers without dependents and with low or no mortgages. As we have found since our son has left home, the impacts of inflation are significantly less when you don’t have dependents, or have fewer. So a lot of people are probably net income richer over the past 2 years.
Also to use my son as an example. 24, has had two great wage rises since he graduated and started working. He’s flatting, so the minor-moderate rent increases for his flat over the past 2 years have had minimal impact when spread across a 4 bedroom flat. Must be many 20 and 30 somethings like him feeling wealthier, not poorer, over the past two years, despite inflation.
Of course, much higher interest rates ARE whacking house prices and house construction, so they are having *some* impact.
But overall?
It's kind of a given you're going to feel 'wealthier' when you get your first real job... that feeling is short lived. Just wait until you want to stop living at home or stop living with a heap of people in a flat to subsidize costs... Let's not forget, the majority of grads have a mountain of student loan debt to repay too - 12% of that being deducted from their salary. A sure way to make you feel poorer after tax, kiwisaver etc deducted also...
Pretty normal in some places (where family is more important?) and used to be more common in English speaking countries too
When you have an accident in a car worth $5k you could be in serious trouble.
Old rust buckets are no longer safe, as time progressed so did car safety.
Please read https://www.ancap.com.au/
My son also did mechanical engineering (Auckland). In 2 years he’s gone from about $70k as a grad to $95k. Left home about two years ago. Paid off student loan and only pays about $230 pw in rent. Central Auckland with low transport costs (he cycles to and from work)
Saves heaps but is no stinge in terms of eating out, drinks, travel around NZ etc.
PS compared to 85vpercent of the world's population our most poorest NZ live like kings. They get money they can get food and water they can get emergency housing and healthcare. Even compared to NZ middle class 100 years ago they are better off most have a ph big screen tv a car washing machine etc etc. R
"I'm sick and tired of you setting me up, yeah
Setting me up just to knock-a knock-a knock-a me down
Down, down, down" (Bruce Springsteen... "I'm goin' Down")
Heres to the engineered recession , high lending rates and eye watering food prices , all courtesy of Central Bankers the world over.... Give yourselves a pay rise.... Well done youve gone out of your way to bring misery to the masses and devalued the happiness a hard days work brings... lol (Critique)
Last week I was told by my partner that on fb/whatsapp groups you will find south/central americans looking for people to share bedrooms with to save money.
I think this is the first order effect, then these people tell others overseas that is very full here which slightly reduces demand.
Good summary. For me it paints a picture of two sides - winners and losers. Increasingly we are being forced into one camp or the other. The latest burst of automation will accelerate that.
It's as ominous as that balance of payments deficit...
The party is limping into that "Half of us have gone but the music is still playing" phase. After a while it's not really a party anymore.
I agree this year has been predictable. While everyone at interest.co.nz were predicting an absolute blood bath, I said it wouldn’t be that bad. And here we are with a 0.1% technical recession that wouldn’t have been without floods, very low unemployment, wages outpacing inflation. Not a good year so far obviously, but not exactly the end of the world for most of us.
Nope, but it is true. Whenever there are good economic numbers the commentators here always try and find some reason to disprove them, but when the numbers are bad they are assumed correct.
if there is good GDP growth next quarter due to insurance payouts will you give grant a pat on the back and say we’ll done? I won’t.
People are out and about spending alright. We took a trip down to Fieldays in Hamilton last Friday. Lots of people about and they were buying. While some exhibitors were twiddling their thumbs, others such as eateries were packed, all car dealerships appeared busy, and as for the Power Tool stores, especially Milwaukee, they were doing a roaring trade. The whole day had a good vibe and there was certainly no sign of an economy in recession. A severe downturn is coming and its still very much early days.
That John Key house that resold for 30% less than in was purchased for in 2017? Let's apply a back of an envelope calculation, using that, to today's average house and see if that transaction might give us a clue to where we might be going.
2017, the average property was ~$575k (today it's ~$875k). 30% fall from 2017 $575k = $405k. Today's average household income is ~$105k
So 4 times today's Household Income; 4 x $105 = $420k, and not too far away from where price should fall to from today's' $875k to 'normalise' the Price/Income ratio.
Of course, that can't happen...or can it?
I guess the tennis court had to be put to some use!
But here's another thing. To the best of my knowledge, Key didn't re-buy the house and trouser a lazy $7.2m. Why? If price were going 'up' that would seem the logical thing to do, as an astute banker with an eye to the future. But he didn't. Now there could be a number of reason for that, but taken solely on the 'making money' aspect, I'd suggest whoever bought the place now, is probably due for a further deterioration is price.
But time wiill tell.
Correction, we used to have overseas nutters with overfilled bank accounts. Then Labour banned foreign buyers in 2018. The days of $23m sales were over. Then Labour sent IRD on a witch hunt to round up all the rich people and investigate their assets in preparation for a wealth tax, and now everyone is getting the heck out of Dodge as fast as they can, even if it means taking a $7M loss on the chin.
ASB’s Tuffley is predicting ‘a big jump’ in house prices is on its way in 2025:
https://www.oneroof.co.nz/news/43786
NB. My view is prices will rise meaningfully from late 2024, but that it will be far from a boom. More like a steady and moderate uplift. But they have another 5-7% (nationally) to fall before then. For me Auckland and Wellington have only another 3-4% of falls left.
This is a pretty dumb comment from a bank economist: “When you draw a [trend] line through the last 10 years or so, [prices have gone] from being extremely above that trend to now being below that trend”. Nothing says that completely ridiculous trend will continue into the future, just like the trend of ever lower interest rates over the last 15 years couldn’t last forever.
This is a pretty bad investment! Gotta wonder why you would buy a rental with such low yield…
https://i.stuff.co.nz/business/132321672/the-house-that-fell-in-price-b…
Last bought in March 2021 for $3.9m, it sold in March this year for $3.13m.
The ad posted on Barfoot and Thompson’s website stated the house had been renovated recently and was rented out for $900 per week.
Real estate agents are hurting in the Hawkes Bay. Lowest listings in 3 years. And prices are still crashing.
Prime example of a distressed sale - Sold - 10 Lincoln Road, Napier Hill - realestate.co.nz
Purchased March 2021 $1.32million. Sold April 2023 $1.16million. Netting a loss in excess of $200k when including the realtor fees.
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