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
No changes reported today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here today either.
FOR SALE INVENTORY WEIGHS ON HOUSING MARKET
CoreLogic says house values are declining, especially in Auckland. House value growth 'has completely petered out,' they say, with the large volume of homes for sale to continue weighing on the market.
BAD BET
SkyCity has suspended dividend payments till at least 2026. They need to do this to preserve 'headroom' with its financing covenants. Earnings guidance for the current year has been downgraded and it will be no surprise their share price has tumbled. SKC is down -15% today.
MEASURING THE DOWNTURN
If you want a clear indicator of the declining health of the construction industry, today's StatsNZ release of data on building work completed in the March quarter delivered it. StatsNZ said total building volume fell -4.0% compared with the December 2023 quarter on a s.a. basis. Residential fell -4.8% on that same basis, and non-residential fell -2.8%. That is a sharp recent reversal because year-on-year total building value was down only -1.0% from the March 2023 quarter.
COMMODITY PRICES RISE
The ANZ World Commodity Price Index lifted +1.1% in May from April as rising dairy and aluminium prices offset lower returns for meat and horticultural produce. Year-on-year it is up +4.0%. In NZD terms, the index fell -0.7% month-on-month as the NZD Trade Weighted Index lifted 1.3%. Year on year it is a +6.3% rise however.
NO BOND TENDER BUT A LARGE SYNDICATION SUCCEEDS WITH MONUMENTAL DEMAND
The Treasury has today announced that an additional $3.5 bln of the nominal 15 May 2028 New Zealand Government Bond has been issued via syndicated tap. The bonds, which carry a coupon of 0.25%, were issued at a spread of 4 basis points under the 15 April 2027 nominal bond, at a yield to maturity of 4.62%. Total book size, at final price guidance, exceeded NZ$15.5 bln.
THE LURE OF 'EASY' CAPITAL GAINS
Aussie borrowers are piling in to investment property and borrowing more to do it. Loans for investors were up a rather startling +36% from a year ago, up +5.6% in a month to April 2024. They have the same issues we have here - rents, as high as they may be - barely cover the mortgage outgoings, let alone property taxes, insurance and maintenance (vacancies are currently non-existent at present). So all this "investor surge" is on the "greater fool" basis that capital gains will be there to cover the operating shortfalls.
SWAP RATES HOLD
Wholesale swap rates are likely to be little-changed again today. Our chart below will record the final positions. The 90 day bank bill rate is up +1 bp at 5.63%, a level it has hovered around for more than 80+ days. The Australian 10 year bond yield is down -3 bps from yesterday at 4.25%. The China 10 year bond rate is unchanged at 2.32%. The NZ Government 10 year bond rate is down another -5 bps at 4.69% from this morning and the earlier RBNZ fix was at 4.68% and down -1 bp from yesterday. The UST 10yr yield is down another -5 bps from yesterday at 4.29%. Their 2yr is now at 4.74%, so the curve is little-changed at -45 bps inverted.
EQUITIES MOSTLY HIGHER NZX50
The NZX50 is down -0.2% in late Thursday trade. SKC's woes aren't helping. The ASX200 is up +0.7% in afternoon trade. Tokyo has opened its Thursday trade up a full +1.0% and Hong Kong is matching that. Shanghai is up +0.4% at its open while Singapore is up +0.5%. Earlier, Wall Street closed with the S&P500 up +1.2% on the strong PMI services surveys.
OIL RISES
The oil price is +US$1.50 higher from this time yesterday, now just on US$74.50/bbl in the US, and up a bit less at just under US$78.50/bbl for the international Brent price.
GOLD JUMPS
In early Asian trade, gold has risen +US$39/oz from this time yesterday, at US$2371/oz. (But it is still well below its ATH of US$2,450/oz on May 20, 2024.)
NZD FIRMS
The Kiwi dollar is marginally higher than this time yesterday, now up at 62 USc and its highest since mid-January. Against the Aussie we are up marginally at just over 93 AUc. Against the euro we are also up marginally at 57 euro cents. This all means the TWI-5 is now just over 71.2. May be the firmness is from the NZGB demand?
BITCOIN UNCHANGED
The bitcoin price is barely changed today, now at US$71,209 from US$71,117 this time yesterday. Volatility of the past 24 hours has been low at less than +/- 1%.
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73 Comments
Aussie borrowers are piling in to investment property and borrowing more to do it. Loans for investors were up a rather startling +36% from a year ago, up +5.6% in a month to April 2024.
Glad you picked this up. The Aussie uber credit bubble. Like free-flow beer at the all-you-can drink. The hangover will be epic. Remember this is an economy has imported hundreds of thousands of immigrants, but only managed to grow the economy 0.1% over the past quarter.
And they have a capital gains tax.
Some knowledgeable commentators on here??? believe if we had a similar tax it would slow the housing gains and make housing more affordable, not happening in Aussie.
We don't know how much housing may have gone up even more over there if there wasn't a capital gains tax. Most of the time ours are at a higher price to income level.
And regardless it generates revenue that allows them to do more things - lower GST, lower fuel tax, tax free threshold etc, which help everyone.
Letter in the Economist about land use in S'pore and why their economic management is far superior to the likes of Nu Zillun.
The list of measures through which Lee Kuan Yew transformed Singapore should also include the public ownership of land (“New management in Singapore”, May 11th). The Land Acquisition Act of 1966 allowed the state to acquire land for any public purpose at existing use value. By 2002, 90% was in public ownership, and had been used to create industrial and commercial parks, affordable housing and outstanding public infrastructure, including a first-class airport and a shipping port.
The leasehold premiums paid continue to contribute substantially to the investment income coming from Temasek and other state-fund managers, now contributing 20% of the country’s operating budget, which incidentally does not suffer the burden of interest on debt. Lee was determined that any uplift in land value after development (especially when facilitated by public investment) would accrue to the state rather than private interests.
Land is perhaps a country’s most valuable asset, and its value (distinct from the earnings from productive investment placed on it) should be used to defray the public expenses, as supported by Adam Smith, John Stuart Mill, Milton Friedman, Joseph Stiglitz and others. State ownership of land is not essential. The value of land can be collected through an annual levy on its rental value, leaving entrepreneurs and homeowners with the security of tenure granted by their titles.
- Dr Andrew Purves Research fellow Bartlett School of Planning University College London
Around 80% of Singapore's residents live in state housing. And they are economically very productive. They don't need to overinvest in housing so they can invest more in more productive sectors.
I always think of this when right wing commentators say: let's be like Singapore! Yes, let's!
The majority of Singapore apartments also have a tiny, often windowless room for the foreign (often Filipino) servant, who gets paid peanuts to work for their Singaporean bosses.
Bit of a stretch there Dr Y. You pick up that info at the neighborhood BBQ?
S'pore is not perfect. The dormitories for Indian IT workers are basic.
There's definitely a lot of imported indentured servants.
Even the government housing is expensive, the wait list is long, and you are only leasing the property.
The only smart thing about it is the government ultimately still retains the land.
Anyway back to your dream of an Asian paradise.
If I was picking a place to live in Asia, it'd be somewhere quieter, where a New Zealand peso buys you 2-3x as much.
I lived in Singapore for over five years, and HDB (what you're referring to) is not state housing in New Zealand terms. It has some similarities, so people in the West get confused and think it's state housing.
The government subsidizes HDBs (around 85% of housing here) in the form of cheaper land (compared to the government selling the same plot to developers who would build private housing). The government hires developers to build houses and then (mostly) private companies to manage the estates. They are usually sold with 99-year leases, so effectively you're buying a long-term lease in a government-owned building. There are some restrictions on who can and cannot buy these, but to simplify, each family has the right to buy one and rent it out if they like, but they can't buy multiple HDBs and become landlords. You can also resell your HDB apartment to the next person after what's called the Minimum Occupation Period (usually five years after the construction).
In the long term, it allows wealth to be recycled across generations and encourages each generation to be smart with money, unlike in New Zealand, where a relatively small number of land-rich people keep getting richer by subdivising land forever to newcomers if feels.
To compare with social housing in New Zealand, where people rent monthly with rent heavily subsidized by taxpayers. You could argue that it's similar; however, land in Singapore today can easily reach $1 billion per plot ($250 million on the cheaper end of the spectrum). I would not say that taxpayers subsidize building of HDBs—it's just that the land is 'sold cheaper' to first-home buyers, unlike direct subsidies we have in New Zealand with Kiwibuild and rent allowances.
When you have the population of NZ in an area the size of Auckland (& it was a mangrove swamp 60 years ago) it made sense for Singapore. That is not NZ.
I've previously mentioned that NZ could & should learn valuable lessons from Singapore. Govt ownership of the land isn't one of them.
Crown / iwi ownership of land is the perfect solution for NZ. Snap us out of our settler mentality and get us focused on real enterprise.
The first settlers in the Wairarapa leased land from local Maori and the arrangement worked well for a while. Then the NZ Land Company marched over the hill and put an end to it - peasants work on the land, the gentry own it and extract rent. That's the way.
While correct, they'd have to purchase the land of private owners most often, who would want to extract as much value for their land form the govt to the point it becomes uneconomical and hugely subsidised. Look at the fiasco that has been KO and our new state house builds with the cost blowouts and lack of any accountability. Therein lies the next hiccup, people have to have faith that their govt is fiscally prudent and spending wisely, and I'd have to say that said faith is at an all time low currently.
Aussie borrowers are piling in to investment property and borrowing more to do it. Loans for investors were up a rather startling +36% from a year ago, up +5.6% in a month to April 2024
This is quite astonishing at a time of higher interest rates. In short, it means that investors must have:
1) sufficient deposits or collateral for borrowing up to 70% from the banks.
2) sufficient other reliable income, to supplement the cashflow shortfall between rental income and expenses.
3) banks are confident in 1) and 2) to lend 36% more to investors than a year ago !
Astonishing!
Worth noting on house prices that mortgage rates increased by 30 - 40 pts between Sep 23 and Mar 24. That's enough to put a downer on house prices. Add in a dose of low confidence and on you go.
Will be interesting to see the new benefits recipient numbers tomorrow - I expect them to be breaking out of the budget forecasts. We also get business operating profit and margin data (by sector) tomorrow so we can see if all of this crushing of demand is persuading companies (in aggregate) to reduce their profit margins by lowering prices by more than they are lowering their costs.
"Worth noting on house prices that mortgage rates increased by 30 - 40 pts between Sep 23 and Mar 24. That's enough to put a downer on house prices"
Actually, house prices increased slightly during this period.
We also get business operating profit and margin data (by sector) tomorrow so we can see if all of this crushing of demand is persuading companies (in aggregate) to reduce their profit margins by lowering prices by more than they are lowering their costs.
Just been reviewing the revenue and profits of infant formula companies across Aussie/NZ. On the bones of their backsides. Honestly, it looks dire.
Interesting. I am doing similar work at the moment in a very different sector. I think there is a huge disparity between the really big players who dominate sales in NZ and have a lot of market power, and the fragile SMEs who are struggling to pass on cost increases to their customers (or are price takers - eg selling into world markets or local monopsonies). The data out tomorrow really tells you the story of the big players.
According to Unusual Whales, Nancy Pelosi has now made $4 million on Nvidia options. She is up +210% in 197 days & still not sold her calls.
Pelosi has made 20x her salary. Her portfolio is near all time highs - up 93%.
Absolute genius and one of the greatest traders of our generation.
And across the border in Canada, "some 70 per cent of the demand for housing in Ontario over the last year came from newcomers to Canada":
https://www.ipolitics.ca/news/70-per-cent-of-new-housing-demand-in-onta…
Wonder what the number would be in NZ?
Coolabah observations on Aussie consumption. Savings rates are lower but they suggest income should soon be boosted by July’s income tax cuts and with total household wealth growing strongly on capital gains from a sharp recovery in house prices.
https://www.livewiremarkets.com/wires/a-more-resilient-consumer-and-exc…
LMAO
FOMO (fear of missing out) on the part of buyers remains almost completely absent while a net 55% of agents now feel that prices are falling in their area of operation.
mean while wingman iceman dickheadman all say how prices are rising... do you guys know what he means when he says net?
Reality is a nasty surprise to some... you can pretend all you want, but this summer is going to be a meat grinder for pooperty prices
and wait there is more...... ginzu knives everywhere...
One other point worth noting from the survey is that only a net 5% of agents this month said that they are seeing more first-home buyers in the market. This is down from 21% last month and a recent peak of 55% in January and before that 66% in August.
no one is interested in buying your shiteboxes at these prices
Wellington house seller after escaping to Australia
House is fully insulated, including walls. Double glazing. Thermal curtains. Woodburner as the power cuts regularly experienced mean a heat pump is unreliable. Warm, dry and mould free ex state house.
Listed in Feb. Dropped price 5 times. Reached the absolute bottom price where we can pay off mortgage in its entirety and agent/conveyancing fees.
No bites whatsoever. Have now withdrawn and listed on rental market.
Property manager said many others doing the same. Foresee a glut of rentals coming onto the market which will depress rent prices.
National wanted to drop house prices and rent prices. Highly likely that people will rent and hold and sell when Labour get back in again where people will have jobs and money gets sprayed around again to get the economy humming.
Unless you’re one of the rare few O/Os converting their unsold house to a rental where the rent will cover the outgoings because you weren’t a stupid O/O that borrowed against the house at the stupidity peak in 2021 to upgrade the cars, boat, and have overseas holidays.
we will be fine with the rent price suggested by the prop mgr. might have to top up $100 every month but that’s not unmanageable.
bonus is that as its been O/O for 10 years we can claim interest deductibility so swings and roundabouts.
We borrowed to do up a house inherited on the death of a parent, and have that house rented out for the next five years. We did labour only agreement with tradies and signed up to our own trade accounts using workplace deals to avoid the usurious markup of the middleman. Cost us $280k to basically rebuild a new home. The framing of existing house was sound but little maintenance done to the outside so a complete overhaul replacing like for like and all done under Schedule 1A building act which greatly annoyed the council as they couldn’t ping us for consent fees. Nothing we were doing was outside the bounds - including full cladding replacement as the old cladding was coming up 30 years old.
We made sure that we kept costs confined by having a clear plan, not deviating, and having an excellent local builder who made sound suggestions that ultimately saved us money in the long run.
overall an excellent rebuild, and tenants are happy with their fully insulated double glazed home with a woodburner that doubles as a stove and puts out ferocious heat so the -5° nights and mornings aren’t noticeable in the house.
The housing market is bananas. The plan was to sell NZ and ideally have a deposit to buy here but that was scotched.
Aussies claim rent is exorbitant, but for the same price as a hovel in Wellington we get a new build 3 bed/3bath, double garage. Bonus is that it fit our furniture we shipped over.
Food is a lot cheaper. Meat is insanely cheap from the butcher. NZ lamb roast is 8.99/kg from certain places. Colesworth are the same ripoff merchants as NewWorths so we tend to go to Aldi for most things.
Fuel is cheap. Car rego is about to come down.
$1300 combined state and federal contribution to power bills mean we aren’t likely to pay a power bill until early next year.
public transport fares about to come down to 50c for the entire journey.
on a salary package worth $145k, cf to 90k had I stayed in NZ. Plenty of work related expenses claimable in the upcoming tax return. Incoming tax cuts also going to increase net pay, but in all honesty it’s just going to be saved to remit back to NZ.
Much better over here.
The silly thing is that Labor is doing quite well in spreading cost of living relief across a number of different areas and Aussies would prefer nuclear power plants and privatisation of the publicly owned entities that are helping pay for the socialised services by leaning toward the LNP.
It beggars belief.
Hahaha yeah nah. Only in the dreams of a dyed in the wool DGM as part of a scenario to say that imported inflation would be rampant and interest rates HFL
Speaking of wool, the sheep farmers are experiencing massive deflation of income, live animal prices are down 2/3rds on 12 months ago... temporary blip, lets hope
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