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
BNZ trimmed all fixed rates today, but only to levels their main rivals already had adopted. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes today. All updated rates less than 1 year are here, for 1-5 years, they are here. This review might be helpful.
THE TIDE MOVES IN FHB's FAVOUR
Our July update of the Home Loan Affordability Report shows first home buyers are now benefiting from the combination of declining house prices and falling interest rates. Now half of all 28 urban areas surveyed allow FHBs to buy a first-quartile home with a 10% deposit and a loan that takes less than 40% of take home pay to service. (Repayments at 40% of take-home pay is the tipping point for a mortgage to be classed as affordable.)
COMMERCIAL PROPERTY MARKET OUTLOOK WEAK
The RBNZ is telling banks to be careful abut lending to the commercial property sector, one they say is know to have cyclical stress. "While challenges in the commercial property sector are being managed, concerns could increase if economic conditions worsen. A downturn in the sector could impact construction and employment and increase loan defaults, putting additional pressure on banks." they noted. Their review found 20% vacancy rates in Auckland's secondary office market.
ACCEPTANCE RISES FOR DIGITAL WALLETS & OPEN BANKING
Payments NZ has been surveying the payments habits and attitudes on users of the generic payments system. They found cards are still king (67%) when it comes to making everyday payments – but digital wallets are on the rise (15%). And when it comes to open banking, the number of consumers comfortable with sharing data with a third party has grown steadily – now at 37% of respondents, up from 27% in 2022 and 16% in 2020.
NZX EQUITY MARKET UPDATE
Check out our new quick update of how the NZX is faring today, as at 3pm. We welcome comments on that update story. Updates to annual results were released today for Vulcan Steel (VSL, #29), Vector (VCT, #12) and Tourism Holdings (THL, #42)..
MILK PAYOUT ESTIMATES RISE
ANZ has trumped all other main analysts with a $9.00/kgMS milk payout forecast for the 2024/25 season. Fonterra's recent rise was only to an $8.50 mid-point, so the ANZ level is near the top end of the Fonterra range. If it pans out as ANZ reckons, that would be the second highest ever (after 2021/22). This is the sort of metric that could change economic sentiment in the country. See all estimates here.
AND COMING IN AT #6 ...
Rabobank has noted that Fonterra rose to be the sixth largest global dairy company in 2024, up from ninth in 2023. That is half the size of #1 Lactalis of France. But Fonterra is almost certain to fall down these ranks as it sells down its "non-core" operations given its recent strategic shift to its B2B ingredients and foodservice business. Overall the whole global sector saw revenues rise just +0.3% over the past year. Fonterra's revenues for the current year will be released on September 25, 2024. The interim January update showed Fonterra's revenues were -15% lower than the prior year as its divestment program grew.
INFRASTRUCTURE RUSH, RISING +$1.5 BLN PER WEEK
Projects are being added to the national infrastructure pipeline fast now. The latest report from the Infrastructure Commission shows that the value of infrastructure projects in the pipeline totaled $148 mln as at June, an increase of more than +20% since March. That is $24 bln more added in just 90 days. Almost 60% of them comes from projects that are funded, part-funded or have a funding source confirmed.
PANCAKING THEN A BELOW TREND RISE
BNZ economist Mike Jones said current mortgage rate falls are unlikely to fuel an immediate lurch higher in the housing market. But they will likely prevent a deeper correction he reckons. They are not expecting any lift in house prices this year but do see a 7% lift over 2025. And when that happens, home loan rates will rise, perhaps quite quickly.
BUILDING COSTS RISE VERY LITTLE
QV has updated values in its CostBuilder tool. Those updates show the cost to build a new home has now largely stabilised, giving builder more price certainty that at any time since the start of the pandemic. Cost per m2 were up just +0.2% in the latest quarter. The changes mean build cost estimates should be a much better indication for actual build costs.
BNZ MEETS SECOND OPEN BANKING API REQUIREMENT
BNZ says it's the first bank to implement the second open banking application programming interface (API) required this year through the minimum implementation plan set for the big four banks by bank-owned Payments NZ. This second API standard is "the piece of the tech puzzle that means our customers have full control over what data they share, who they share it with and importantly, it gives them control to stop sharing their data too," BNZ says. It says some 250,000 BNZ customers are using services made possible through this technology, including services from Xero, Volley, and Blinkpay, that connect to BNZ through secure APIs.
TSB FINED $2.47 MLN OVER CCCFA BREACH
TSB has been fined $2.47 mln in the High Court for breaching the Credit Contracts and Consumer Finance Act in relation to fees set in its standard contracts without reference to the Act's requirements. In a case brought by the Commerce Commission, TSB admitted overcharging about 42,000 customers by about $3.6 mln having self-reported the issue to the Commission. Customer remediation has occurred.
DEBUT SEEKS BANKING REGISTRATION
Fintech Debut says it's applying to the Reserve Bank to become a registered bank, aiming to become "the first locally owned bank designed for an open banking environment and artificial intelligence (AI)." In what it claims is a first, Debut says it currently applies a 5.10% per annum universal interest rate to both transaction and savings accounts, with no penalties, lock-ups, or minimum deposit requirements. Debut says it has some 7,000 people on the waiting list for early access to its app.
MODEST PROFIT GROWTH
China said profits at its largest industrial firms (mostly SOEs) rose +3.6% in the first seven months of 2024. This was little-changed from June. They were up +4.1% in July from the same month a year ago. That they are still profitable overall is a good sign, and they are not getting worse.
SWAP RATES STILL LITTLE-CHANGED
Wholesale swap rates are probably little-changed again today with a touch of firmness perhaps. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.22%. The Australian 10 year bond yield is up +1 bp at 3.93%. The China 10 year bond rate is up +1 bp at 2.17%. The NZ Government 10 year bond rate is down -1 bp at 4.26% and the earlier RBNZ fix was at 4.18% and down -1 bp from yesterday. The UST 10yr yield is down -2 bps from yesterday at 3.79%. Their 2yr is now at 3.90%, so that curve has now tightened up, inverted by just -11 bps.
EQUITIES ALL SOFT
The NZX50 is down -0.5% in late Tuesday trade. The ASX200 is unchanged in afternoon trade. Tokyo has opened down a minor -0.1%. And Hong Kong is down -0.2% at its open. Shanghai is down -0.3%. Singapore is down -0.4%. Wall Street ended its Monday trade down -0.3%.
OIL UP
The oil price is up nearly +US$2 from yesterday at just under US$77/bbl in the US, and at just over US$80/bbl for the international Brent price.
CARBON PRICE HOLDS
Today the carbon price in unchanged today at $60.50/NZU. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD HOLDING IN RANGE
In early Asian trade, gold is down -US$3 from this time yesterday at US$2509/oz.
NZD SOFTISH
The Kiwi dollar is down -10 bps from this time yesterday, now at 62.1 USc. Against the Aussie we are also down -10 bps at 91.6 AUc. But against the euro we are still at 55.6 euro cents. This all means the TWI-5 is now at 69.7 and again marginally lower.
BITCOIN TURNS LOWER
The bitcoin price is down -1.6% from this time yesterday, now at US$62,986. Volatility of the past 24 hours has been modest at just on +/- 1.2%.
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62 Comments
"current mortgage rate falls are unlikely to fuel an immediate lurch higher in the housing market... but (they) do see a ..lift over 2025. And when that happens, home loan rates will rise, perhaps quite quickly."
So encouraging more new Debt to aspiring buyer at lower rates, only to potentially see them rise next year, is a good thing? Rollup, Rollup! Get a new mortgage at affordable rates today, and don't worry about how to make the payments tomorrow. Risk for the proud new mortgage owner, and risk for the lender that defaults will rise.
Surprised something similar isn't happening in Aussie under Mad Albo. Would probably get consideration under Labor/Greens/TPM.
California is close to approving a measure that would make illegal immigrants eligible for up to $150,000 in state-supported home loans for down payments. The "California Dream for All" program would provide 20% down payment assistance, with no savings required from recipients. Governor Gavin Newsom’s spokesperson said he would evaluate the bill on its merits if it reaches his desk. Critics argue that this measure could incentivize illegal immigration to the state.
https://www.politico.com/news/2024/08/26/california-undocumented-immigr…
We've collectively lost the plot.
"Participants must be first-time homebuyers.... Their income level must be below specific income limits depending on the county, which ranges from between $100,000 and $300,000."
Current median wage, USA? - $59,228.
We've collectively lost the plot.
You mean the Anglosphere? I tend to agree. There's plenty of signals coming from the ruling elite and political ecosystems of how broken everything is. The California idea is just one example. Closer to home, the ACT government's figures claim the cost of a Civic stadium has jumped from $350 million in 2011 to $582 million in 2021 to now $2.9 billion three years later (https://raidercast.com.au/the-2-55-billion-cost-of-doing-nothing-15-yea…
Don't be surprised if we do something equally as inane - build the world's largest cycle parking space and gift everyone in the country an e-bike at the cost of $30,000 per bike.
Yes I think the west has lost the plot the last 10-15 years and needs a new vision/leadership/direction. I’m centrist but I think we swung way too far to the left the last 5 years. Eg NZ, Can, US. Uk heading that way now (although their alternative turned out to be a wreck as well…)
needs a new vision/leadership/direction
This is what various political groups and leaders have been trying to sell us for decades.
But the realities of the 21st century, is a hard vision to sell. The West has lost the technological superiority that fueled it's prosperity for centuries, be it military technology, industrial, or political.
Now that the resource gain from colonizing much of the world is also gone, what is there to offer? We don't even have a superior social or ethical system to promote. Much of the world is laughing at us, and we totally deserve it.
The overall trajectory is negative. The West is destined to continue to lose ground, prosperity, and influence. How can you sell that in a positive light?
> Much of the world is laughing at us, and we totally deserve it.
Is the before or after they all desperately try to emigrate?
Let's not let internet fantasising get away from the facts here: many countries face problems worse than the Western ones do and the hurdles they face to reach Western levels of wealth are not insignificant.
https://www.bbc.com/news/articles/c87r7kp55e3o
Since 1990, only 34 middle-income countries have transitioned to high-income status, with over a third benefiting from integration into European Union (EU) or newfound oil reserves.
Economists Raghuram Rajan and Rohit Lamba separately estimate that even at a very respectable per capita income growth rate of 4%, India’s per capita income will reach $10,000 only by 2060, which is lower than China’s level today.
My prediction would be barring technological advances driven by the Western nations and East Asia that bring in global prosperity (rendering the discussion moot), many of today's poorer nations will remain meaningfully poorer than today's wealthier countries.
> The West is destined to continue to lose ground, prosperity, and influence.
So here you meant it would lose "ground and influence" rather than prosperity? Or are you talking relatively? Because even the worst projections show the West (or many nations within it) will continue to outgrow much of the rest of the world.
All 3.
The West hasn't managed to develop it's industry significantly to replace that which is has lost in the past 40 years.
Many (most) of it's economies are now highly geared towards consumption, paid for with debt. This mirrors the Cantillion effect; a mature economy loses its manufacturing capacity, and takes on more and more debt, which it then expends on luxuries.
It struggles to successfully and efficiently deploy new infrastructure, or even maintain what it already had. While other nations can say "let's make a bridge/tunnel/hospital", and in short order, it's there. And it works. And the equipment is all more modern.
It goes beyond an internet discussion. Seeing places reach parity with us, then continue to outstrip us, while we go sideways, and arguably backwards. Europe and America's great cities, with walls covered in Graffiti, and shuffling junkies walking around like it's a scene from the Walking Dead.
And the most successful people in America, are Indians.
The only advantage the West had, was via serendipity.
Lol well thats one hell of a take that is necessarily free from any hard data. The only country you can argue that is true at all would be China (with caveats), certainly not a broad based truth applicable across the "non-West" (which is a meaningless category).
If we want to talk about shuffling drug addicts (which are a problem) let's not exclude things like tragically stunted children (https://www.thehindu.com/sci-tech/health/36-children-aged-under-5-stunt…). Unless maybe feeding your kids is a "debt-fuelled luxury" in your world view.
Your view of the world is wrong because "Non-West" is not a real category. Everything you are saying is only true of China. Re consumption you might want to read the work of Michael Pettis to see how that operates. Without the West (and other wealthy nations) willingly absorbing Chinese surpluses they can't operate. I suspect the next 40 years will look very different re Western industrialisation compared to the last 40. Certainly in the Anglo world.
Easiest way to figure out where in the world is prosperous and where isn't is to watch immigration flows. And those all go firmly one way.
> And the most successful people in America, are Indians.
Indians succeed everywhere except India. To the eternal frustration of Hindu Nationalist types everywhere. It is only when large parts of dysfunctional Indian culture are abandoned that this can happen. Unfortunately the horrendous caste system and social structure is deeply baked in and extremely corrosive to development.
Similar to how the poorest Chinese people on the world are in China.
The West's culture is still by far the best for human flourishing and elite human capital flows reflect this. And also one of the reasons to be optimistic about the West's prospects. We can take in immigrants, assimilate them, and benefit from them. I have many anglicised Indian friends who married Kiwis/Aussies or were the children of those pairings and now are broadly based "Brits" for all intents and purposes. Culturally Western/British in every way that matters.
India was 25% of the global economy before 10,000 poms with muskets held it to ransom and stole it's stuff.
When they left, it ended up being only 4%.
70 years after that, Indians own Land Rover and Jaguar, and England doesn't make any of it's own cars other than niche hobbyist toys.
One Pom with musket for every 100,000 Indians. And those Indians were literate and could get their own muskets. Your story is over-simplified. When the British arrived in India the global economy didn't include the Americas; when the British left the world had experienced massive industrial growth and population growth. From 1600 to 1948 the population of India more than tripled. What was the total GDP of India from the arrival of the Portugese until independence?
It was nothing like 1 Pom for every 100 Aboriginal Australians who had no literacy, no wheels, no steel and no natural immunity against smallpox, cholera, measles and tuberculosis.
In today's England the generalisation would be Indian immigrants work hard and focus on wealth and the native English don't. They both get what they deserve.
Yip I have that feeling on a daily basis (that a large % of the population have completely lost their minds). When I lived in the US 10-15 years ago I would have identified as a Democrat. But it appears the current dems have lost the plot in a major way with their policies (and personalities). (And no I’m not a Trump fan either!) The dems policies around immigration is nuts.
I recall being thrilled when Obama was elected for his first term, he was such a breathe of fresh air, so articulate. Fast forward to today the and Democrats are a disgrace, a hard left totalitarian omnishambles. What we used to consider "left" is now the centre across the West. Bloated welfare states, high taxes, Net Zero, DEI and open borders are the centre. Remotely challenge this and you are labelled "hard right".
It really feels like a Marvel movie where Trump is putting together the X Men (Gabbard, RFK, Musk, Vivek, Vance) to save earth from the dark side.
Left or right is a red herring.
Both are about drawing down the resource stocks of the planet - just to the short-term benefit of slightly different cohorts.
Both are running into the Limits to Growth.
Neither have answers to same. Nature doesn't give a r/a whether a species is empathetic, or self-aggrandising. All she cares about is whether a species is overshot.
And our one is.
I agree PDK, the USA is hilarious because it doesn't matter who gets in the downward trajectory for them will continue. The November 4th election will be like holding a fireworks display on the front deck of the Titanic while having an argument about more red or more blue skyrockets.
Haha yes I agree TK. Watched bits of RFK JRs interviews with Tucker Carlson and Dr Phil during the day today - he’s getting quite a bit of time in the spotlight now after the left leaning media tried to silence him (and sue him off the ballots) - very ‘democratic’ huh…
Interesting how any position in the west at present that is centrist or centre right is now being labelled as the ‘far-right’ across all the left leaning media outlets. It feels more and more like Orwells 1984.
I still don't understand why the Democrats went to court in places like New York to prevent him from going on the ballot (if - as I'm seeing widely reported online - RFK took votes from Trump. In that case surely you'd want him running everywhere?) What's 'Democratic' about stopping somebody for running and giving people another option?
To the OP's point, what an absurd policy. What is the American left's obsession with welcoming and worshipping illegal immigrants? And how on earth can you whinge about high housing costs stiffing the working class, and then subsidise people with no legal right to be in your country anyway to buy property, thus juicing the market and taking away from supply?
Did you know we used to have a power plant whose sole purpose was to generate electricity in a dry year. Labour built it after a dry year event.
https://www.beehive.govt.nz/release/further-government-decisions-reserv…
And then Naitional sold it off.
https://www.beehive.govt.nz/release/whirinaki-plant-be-sold
As a general rule, reserve energy will enter the market once the electricity wholesale spot price reaches 20 cents per kilowatt-hour (c/kWh). By way of comparison, spot prices are likely to average around 6 to 7 c/kWh over time, although they tend to rise as dry weather conditions reduce hydro lake levels. This means that reserve energy will be “triggered” (i.e. will operate) infrequently.
6 to 7c / kWh! ahh the good ol days
Yes, from Sunflowers. https://www.sciencedirect.com/science/article/abs/pii/S0960148122015622
There are so many things which have happened in the electricity industry that the public have no idea about whatsoever....
Just one tiny example. Black start. The old Huntly power station is one of the few stations capable of doing this. It has a huge room full of auxiliary batteries to kick start things if all power shuts down in NZ.....
Commercial property is most likely the cause of the next downturn. Commercial valuations are simple maths. It's rent divided by yield. As interest rates grew over the last 3 years, so did yields, meaning values went down, a lot. Add more vacancies (= less rent) and there is real concern.
What's your problem J.C. ? From multiple previous posts, you know that I have been concerned about the state of CRE for some time. I'm qualified to assess this situation, because I have been investing directly (not through shares or a fund) into commercial RE for many years.
Sounds like you’re starting to get into asset pricing there Yvil using cash flows and discount rates. Robert Shiler has the Nobel prize for his research on asset pricing - his book ‘Irrational Exuberance’ is a great read on this specific topic coupled with human emotions (and why peole buy and sell assets when it is illogical to do so based upon fundamental valuations).
I'm not "starting to get into asset pricing" IO. I understand valuations of CRE, not through reading books, but by having bought, held and sold multiple commercial properties in NZ over 25 years. I understand valuations, leases, S&P agreements etc better than most.
Residential properties are generally valued 3 ways.
1) comparable sales: compared to similar houses in close location, then adjusted as "inferior" or "superior"
2) replacement value, i.e. land cost + cost to build a similar size house then reduced by a depreciation factor dependant on the age of the house
3) rent or potential rent the house can fetch, then divided by a yield to achieve the value.
These three considerations are then weighed differently depending if the house is mostly for family living or more intended as an investment.
Commercial RE on the other hand is mostly 3) yield on rent or potential rent. Factors like the strength of the lessee, length of lease and of course location also come into play.
I have often thought that potential capital gain has influenced the decisions of market participants buying . IE who could I exit this trade too, what would they pay
- does my corner site rate above others
- is this site developable - even if not by me etc
- is this a cash flow positive deal (remember the brick and tile sites of flats that the old guys like BiggestDaddy and RobetJones used to rave about, ie all about yield.
- many have found themselves unintentianoal landlords bought at 500k now worth 2mil but have moved to another city and cannot of dont want to sell as may move back (remember the days of don't sell AKL you wont be able to buy back in.....) yeah nah
I cannot see how PI makes much sense without cap gains when other investments like bonds and stocks off tax free cap gains...
I think about 90% of the mils I have made off property over the last 20 years has been capital gains, if they are going to be taxed at top marginal rate , it seems to me not to make much sense unless you can rise above shit box investments and buy sub-dividable land? ie if you don't take risk how can you expect any pudding
I think the game has perhaps changed, it was an easy game, I think its just got harder and you need more capital to make it work for you if you need lower risk.
Yes thanks, they are valid metrics.
I wonder how residential investors view yield vs commercial investors, I assume capital gains apply on both sides.
I personally think both are very yield based valuations if the crazy capital gains are a thing of the past...
I cannot see what the capital gains on resi have been based on apart from bigger fool theory. I guess we will soon find out .
Each experience adds to knowledge/wisdom/character. I have enough money to live happily but I’m cautious to avoid the pursuit of too much. As the most important prophet in the western world said ‘seek treasures where rust and moth do not corrupt’. Money seems to corrupt the minds of men and people these days don’t appear to know when they already have enough.
Big rally in some of the NZX listed REITs recently, KPG at 97c when it was bouncing around the low 80s a couple of months ago.
Interesting to see the difference in reported secondary vacancy rates at 80% vs the high 90%s reported by the listed companies. I guess the big listed companies tend to own quality, in-demand buildings.
Big rally in some of the NZX listed REITs recently, KPG at 97c when it was bouncing around the low 80s a couple of months ago.
Low 80s are its lowest prices. And the REIT is down 33% from its peak in 2019. Good div around 6.9%.
You don't work for Glengarry Glen Ross do you?
Not sure if this is your point but Sydicated properties in NZ are almost all secondary property. They are in a tight spot at the moment. Lots of rumours of potential forced sales over the next 6 months. I would strongly advise anyone against buying into syndicates. Better off buying listed property stocks. Better quality of assets and much more liquid.
Probably nothing
Number of homes for sale soar ahead of spring
Fresh home listings in some of the more expensive Sydney suburbs have more than doubled in the past four weeks as sellers scramble to beat the spring selling rush, data from CoreLogic shows.
I thought spring summer where up months?
FONGO?
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