Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
None here today, so far. But some banks are offering juicy incentives rather than lower rates. You can stay up-to-date with these offers here.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here either. But we should note that Liberty Financial has had their investment grade credit rating raised one notch to BBB. More here.
HOLIDAY SCHEDULE
We will be publishing normally each day this weekend, but will only have holiday service on Monday, a public holiday. Full service will resume Tuesday, June 4, 2024.
REGIONAL BANKING HUB TRIAL FAILS ON LOW DEMAND
The five largest banks said today they will extend their current commitment not to close regional branches for the next three years, as part of the conclusion of the regional banking hubs trial. That trial did not show much demand. In fact, demand for these physical services with hub usage was lower than many comparable regional branches or ATMs.
NO MORE RIO STANDOVER TACTICS
Rio Tinto strikes a 20-year deal to keep the Tiwai Point aluminium smelter running after signing an electricity supply agreement with Meridian Energy, Contact Energy and Mercury NZ. Those supplying companies claimed the price is materially higher than in the transitional agreement.
LOTS OF BIDS BUT MOST MISSED OUT
More than $1.1 bln was bid at today's two NZGB tenders for the $500 mln on offer. But only three bids were successful. One bidder scooped up all the May 2031 $275 mln at a yield of 4.67% pa. Two weeks ago the yield for this maturity was 4.46%. Just two bidders took the $175 mln May 2034 offer, at 4.81% pa. Two weeks ago the yield was 4.57%.
LENDING GROWTH LIMP
Prior to the pandemic, the five year average of home lending growth was +$1.2 bln in April from March. In April 2021 it was almost +$3 bln. In April 2022 it was +$1.4 bln. But in April 2024 it was only +$879 mln but at least this was better than the April 2023 +$577 mln. Lending growth to businesses and the rural sector also remain very limp.
MONETARY POLICY FIREPOWER RISES
We should especially note that more than 45% of the total home loan book is now scheduled to be rolled over within the next year (including floating). That's an eight year high. That is $163 bln of home loans that will get a prompt signal if home loan rates change (either way).
STILL PILING IN TO TDs
Household bank deposits grew +$956 mln in April from March. This is modest from an historical perspective. But household term deposit growth was +$1.5 bln in the same period. That extra was shifted from equally from transaction and savings accounts.
FANCY STADIUM WITHOUT RATEPAYER FUNDING (?)
Auckland Council has dumped out two of the "downtown stadium" project options, including the sunken Bledisloe Wharf option. This council is trying to achieve an endurable multi-purpose stadium option without having to commit any funding. The finalists are the Te Tōangaroa/Quay Park option (near Spark Arena), and an upgraded and covered Eden Park.
JAPAN DATA MIXED
Japanese retail sales made good gains in April, up +2.4% from a year earlier and above the +1.9% rise expected. But som eof this was catchup from the modest +1.1% rise in March. But Japanese industrial production was little-changed in April, a hesitation after their large +4.4% rise in March from February. Still, they have some more recovery required to peg back the prior declines.
CHINA PMIs STAY WEAK
After two months of small expansions, the official China factory PMI contracted in May. A small expansion was expected again in May, so this will be a disappointment. Meanwhile their official services PMI is still expanding, but at an unchanged and low rate.
SWAP RATES SOFTER
Wholesale swap rates are likely to be a bit lower today. Our chart below will record the final positions. The 90 day bank bill rate is still unchanged at 5.63%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is down -6 bps to 4.45%. The China 10 year bond rate is now at 2.33% and up +2 bps. The NZ Government 10 year bond rate is down -8 bps at 4.88% from yesterday and the earlier RBNZ fix was at 4.82% and down -10 bps from yesterday. The UST 10yr yield is down -8 bps from yesterday at 4.54%. Their 2yr is now at 4.93%, so the curve has shifted to be more at -39 bps inverted.
EQUITIES LOOK AT A WEEKLY RETREAT
The NZX50 is up +1.1% in a late recovery today but is on track to end the week down -0.9%. The ASX200 is up +0.5% in afternoon trade, but if this holds it will also end its week down -0.9%. Tokyo has opened up a minor +0.2% and heading for a -1.7% weekly retreat. Hong Kong is up +1.1% in early trade which aims to end the week down -0.9%, while Shanghai is up +0.3% which would enable it to claim a +0.2% weekly gain. Singapore is up +0.3% at its open. Wall Street ended its Thursday trade down -0.6% with a late session fade.
OIL FALLS
The oil price is -US$1.50 lower from this time yesterday, now just on US$77.50/bbl in the US, and down a bit more at just on US$81.50/bbl for the international Brent price.
GOLD FIRM
In early Asian trade, gold has risen +US$13 from this time yesterday, now at US$2343/oz.
NZD UNCHANGED
The Kiwi dollar is little-changed from this time yesterday at 61.2 USc. Against the Aussie we are unchanged at 92.3 AUc. Against the euro we are unchanged at 56.6 euro cents. This all means the TWI-5 is still at 70.4.
BITCOIN FIRMS SLIGHTLY
The bitcoin price has firmed today, now at US$68,558 and up a bit less than +1% from this time yesterday. Volatility of the past 24 hours has been modest, at +/- 1.8%.
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41 Comments
Realistically we don’t need another stadium.
We need good concert venues with capacity to have gigs at night - just ignore those who choose to live around eden park if Spark is insufficient.
Rugby is dying and only fills a stadium a couple times a year for All Black games, and soon it won’t even do that.
Not from Auckland & only had the pleasure of Eden Park once and it seemed to me to be a really good ground, especially spectator wise. After the investment for upgrades for the RWC and all the great NZ history involved it would be regrettable to abandon it surely. Design engineers should be able to come up with a light weight dome as suggested.
IT guy is right - the local residents association with Helen Clark to the fore hold the country to ransom around its use.
Theres also the wholly inadequate transport to/from it - complete cluster f trying to use public transport. No point pouring more money into it.
What is the problem we are trying to solve?
Helen Clarke?
No it was a guy called Mark Donnelly who headed up the Eden Park Neighbours Association who resisted Eden Park being used.
https://m.youtube.com/watch?v=qzIMHk6Z2l8
Long live the king
Eden park got significant upgrades for the 2011 RWC, which is only 13 years ago. So it should still be fit for purpose for a long time if durable solutions were used. Wellington stadium can hold about 40,000 people but it was always too small to hold things like a RWC final. It was originally going to be able to hold about 80k people, then got reduced to 60k, then 40k to save costs. If they had made it hold 80k, then NZ wouldn't need another stadium of that sort of size, and it is central in the country and at a transport hub, it is accessible by all. . But 40k people makes it a boutique stadium which limits it's use. I understand it also only cost about 120million including all the red tape costs. Which adjusted for inflation is about 220 million. There is no way that you could build it today for that, it would likely be at least double or triple that. Also we seem to have moved to dedicated stadiums for Rugby and cricket, when Eden park and Wellington Stadium are or were multipurpose, as was the earthquake damaged Jade Stadium although they have compromised field sizes/shapes. Cricket really needs a big stadium to attract the cricket world cup.
Look I’m all for thinking big but realistically how many RWC or CWC finals are NZ going to hold? 1 every 20 years if we are lucky? What happens the rest of the time? Wellington npc has moved to the 5k capacity Jerry collins stadium, imagine them trying to play in an 80k venue.
We are going up against major developed nations, and developing nations, willing to throw huge sums at these once every 4 year events, and live with the cost given their big populations. Most national stadiums sit empty and only fill half a dozen times a year - be that Paris, London, Rome etc.
We are too small and too far away to ever host the Olympics.
The US is a bit different with NFL stadiums and dedicated concert/indoor venues.
In 2011 they went for the budget option. The south stand was built then, and is still good. North stand from the 1990s was left as is. It's the North stand which is now at end of life, and the proposal is to replace it. If they do I hope they move it in and create a rectangular football stadium.
From memory the cake tin was built circular in the late 90s with the 2006 Commonwealth games in mind, but wgtn lost out to Melbourne. Kinda funny cause now they can't give the comm games away.
Has this been discussed?
https://www.realestate.co.nz/property/103-saint-stephens-avenue-parnell…
$3.7m is quite a haircut in a year.
Er no. It sold for roughly the same price in a year and the 2021 price was clearly from moronic frivolity in 2017 and the joke of a CV afterwards. Have you seen the property? Big red flags.
https://www.propertyvalue.co.nz/auckland/auckland/parnell-1052/103-st-s…
The kind of place that is fun for the short term, but really has massive upkeep that is not worth it for, checks notes, inner parnell (yikes) and no helicopter options which means you need to be stuck in traffic with the plebs. You need the wine cellar as there are no nice wineries or restaurants nearby and the property would drive anyone to drinking.
Its one of those houses for stately gatherings, not living. Sell it to an ignorant dignitary, make some lie about parnell having prestige (regardless of the state of parnell now) and then be glad you walk out with as much as you paid for it.
Having lived in parnell it is definitely not worth it. Wait, nah most the good spots moved elsewhere. It is a money hole now. With not nearly enough parking for a suitable gathering size.
What happened to the $250 tax cut?
Did it go to landlords instead?
Does the calculator allow you to work out how much you save depending on how many investment properties you own and how much you now don't have to pay in tax?
Let's all remember this:
https://www.nzherald.co.nz/nz/politics/revealed-national-tax-plan-offer…
India's central bank has moved around 100 tonnes of gold from Bank of England in London to its domestic vaults, with plans to relocate more soon, according to a TOI report. This significant transfer is the first since 1991.
https://m.economictimes.com/news/economy/indicators/rbi-moves-1-lakh-kg…
Latest on the PI FB chat tonight:
‘Cashflow problems.
I have 2 investment properties in Auckland which were neutral cashflow few years back but after doing cashflow analysis for this financial year they will cost me $28k a year ($550 per week) to top up.
Realistically i could probably hold on for another year (maybe two) at these interest rates but wanted to see if others are in a similar situation and what their thoughts are?
• Are you just praying interest rates will come down?
• Are you going to increase your rental prices up dramatically? (I have done mine recently to market value)
Cashflow is really tight atm so i wouldn't be able to refinance to another bank to get Interest only, extend the term.
Any tips would be much appreciated’
I think I bit of panic might be starting to creep in as people start to become aware of the potential losses they could be about to face as the economy continues to deteriorate - and as yield curves indicate that the worst is still ahead of us - not behind us.
Remember that the greatest asset price destruction in past recession happens after the yield curve normalises - that hasn’t happened yet - so the losses experienced so far in the property market could just be a warmup for what is in front of us (not a forecast, just a warning based upon historical trends).
In the comments of the referenced post above, others are saying they are in the same position and may need to sell - this could become a rush to the exits unless rates drop soon - but we can’t do that (without further unintended consequences) until the Fed does and the US economy looks far stronger than our own.
It really does depend on our migration settings as well. A high amount of new population keeps the demand for both rentals and properties to buy. You will be able to make clear migration number predictions based on our current migration numbers and the likely responses of government to minor issues. A look at the skills list will tell you it is likely to be strong & high levels of low skill migration inward still and the second companies run low on people demanding to pay tens of thousands of dollars for low wage work the government (regardless of who is in power) will step in with a "special" visa category with easy and almost automatic residency conditions.
Admittedly though if you are not able to service the debt yourself for a significant number of months then it is not a good idea to keep it. But if you are selling now you will want to be careful of overzealous real estate agents and taking a big haircut on their recommended sale price (they use the usual bait and switch strategy). I would recommend do your research and take your time to do the sales yourself with a clear head. Better to start now with a well researched range of values and not feel pressured in the sales process. Better then waiting for any bottleneck to block up even more or a crunch as the number of properties listed keeps on increasing. If you can weather several months of paying the debt yourself then your risk is much lower.
Ours was freehold but there were the continuous costs associated which is why we are shifting gears.
That's a post out of the blue, but also a good perspective.
Pretty hard not to see NZ governments continuing to pump migration. It's easy quick stimulus, and global migration is only continuing to grow.
That many people don't like it, is justifiable, but also irrelevant.
Always interesting how many people read the FB PI pages. Those "investors" are usually the sorts one can snap up a bargain from. Like going to a "going out of business" sale. There'll be some like that, but hard to say how many. Probably less than the number of owner occupiers up against it also.
One thing people often overlook is how much people will sacrifice to not get into a forced sale situation.
Yep far more people have an emotional attachment to investment properties (ironic considering they do not personally live there) and selling them often feels like failing rather then redistributing the capital to better places or even buying in more profitable areas elsewhere. So there will be many investors hanging on tooth and nail and doubting themselves rather then selling. Which can lead them into more dire straits as when they are finally forced to sell they are in a much worse position and have to take longer before reentering the market or have less options in other areas (they may even come out with debt). Knowing a few investors like this some are waiting for the optimum time to sell at which point they will not want to sell as the property value is bolstered again which means they hang on tooth and nail. It also means rents are far more likely to rise in the short term and the tax benefits for landlords only draws out the pain for everyone renting a little bit longer and especially if you are wanting to buy from them (as the wait for them to list will be longer too).
FB is a lot like the NZ reddit investment pages, a lot of parties on them follow more viral emotional trends like an animal being pulled by a nose ring. It interested me that many investment bot AI were directed to follow and even create posts on social media so there was always the high likelihood of false personas for manipulation. I know after a massive event or financial shift it can take 2-3 years of holding on before people to reach their limits to sell, even when they are treading water for years and for some they are more likely to attempt their lives before they try selling properties. Property investment is that tightly tied into the psyche of investors in NZ and it only took 2 generations to really screw it in deeply.
I think a lot got the bug after the 1987 share crash where commonly held darling stocks went to zero. Ariadne, Judge Corp, Tasman props ( think not zero but close like 9c...?) hard lessons for those who joined share clubs and believed that you could not loose....
Those who at the time held property used to say, at least it cannot go to zero... which at the time some though might happen after 1987. Its a very NZ thing, I think Aussie is so high just because they like gambling more then Kiwis.
Lets not forget how many have leveraged every opportunity to refinance another rental, at 20% down they must be worried, at 30% down they are under water....
Its a very NZ thing
Owning property as an investment is pretty common, for hundreds, if not thousands of years.
In Korea, it's common not to pay rent, and instead tenants offer up 60% plus of the homes' value as a sort of bond (which most get a loan for). The landlord takes the bond, and uses it to buy another rental. Whereby they get another bond, which they use to buy another rental.
Sure, yet when they overdid in their many of thousands, by hundreds of thousands of $, it becomes a financial WMD of cluster bomb proportions.
The fuse is lit and the defusal sqaud have no answers, other than evacuate the blast zones.
MANY THOUSANDS ARE UNDERWATER AND UNABLE TO PAY MORTAGES IN NZ NOW.
BY ANY MEASURE, THE WORST IS STILL TO COME.
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