Reserve Bank Of New Zealand Lowers OCR To 2.5% April 30 2009

New Zealands Official Cash Rate has been cut again to 2.5% which is a further sign that the Reserve Bank is trying to stimulate the economy. Dr Alan Bollard this morning said to the people that he sees the Official Cash Rate being low for around the next 18 months as the economy is finding its place and evening out.

Bollard says “We expect to keep the OCR at or below the current level through until the latter part of 2010. The OCR could still move modestly lower over the coming quarters,” he went on to say; “The world economy deteriorated further than expected in the first quarter of 2009. While monetary and fiscal policy responses in many countries have been substantial and there are some signs of stabilisation in some countries, we still expect the adverse economic forces generated by the crisis to remain dominant throughout 2009. The timing and extent of global recovery remain highly uncertain.”

The OCR is the lowest it has been for 10 years and is now at a record low for New Zealand. Bollard wants to see banks passing on this cut to the consumer. The last OCR cut saw an increase in the 5 year interest rates which didnt impress many of the NEw Zealand public but due to the high cost of borrowing from overseas the banks couldnt sustain the low rate on the 5 year loans. To the right is the graph of the OCR trend in the previous 5 years; picture supplied by Christoph Lukasser

Westpac Bank has moved quickly in response to the OCR cut, saying it was cutting its 6 month home loan rates by 0.4 per cent. This brings its 6 month home loan rate to 5.39 per cent, due to come into effect this Friday. As with most times when the OCR is cut our New Zealand Dollar dropped again this time The New Zealand dollar plunged nearly 1cagainst the American Dollar from US57.34c to US$56.46c

Bollard went on to give a little optimism to the markets by saying; “We expect the large decline in the OCR over the past year to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. This, together with the stimulus from fiscal policy, will act to support the New Zealand economy and eventually see activity trough and pick up thereafter. However, the scale of the global financial crisis and domestic adjustments underway are such that it is likely to be some time before economic activity returns to robust and healthy levels.”

In my view there is still a long bumpy road ahead for the economy in New Zealand and around the world. The Swine Flu has not helped matters at all with already Pork exports stopped, tourists from around the world cancelling their trips and New Zealanders deciding not to travel abroad. This will cause the econonomy to retract even further than it already has and with winter on its way will hurt many businesses in the pocket. With Bollard saying the OCR will stay low for around 18 months will give businesses and people confidence of knowing what levels to look forward into, espessially over the summer of 09/10 where many businesses including mine are going to have to plan ahead for and try and grow.

It will be rather interesting to see how the New Zealand economy is going to fear in the next 6 months over the winter period with all the things happenoing in the world at the moment. What do you feel will happen?

April 30 2009 | Buyers and The Market | 1 Comment »

200th Post Milestone Finally Reached

What a ride. Its been great.

Thanks to everyone who has subscribed to this blog and who continues to read it.

Traffic is increasing steadily with now over 500 unique views per day and over 40,000 unique views in the 11 months of writing this blog.

Lets go for the next 100 and upward of 1000.

I look forward to hearing from you in the future.

Best Regards

Deon

Bonus because I am in a good mood!

Click this link – I am giving away for free for the next few weeks anyway my financial e-course that I worked on for a year. This is 6 weeks of good hard core planning to help you from the grass roots with your finance. Even if your financially savy I still think this will help you. Part of this course is on my blog if you want an example.

Please click the link here which will take you too the page where you can recieve the e-course. I have activated the clickbank code so that all you need to enter is blog and you get it free – you will not be charged by clickbank. Disregard that on the website. This will save you $90.

I hope you enjoy.

Deons E-Course

April 30 2009 | Uncategorized | No Comments »

Swine Flu Virus Maybe In New Zealand. What Will Be The Implications

The flu was most deadly for people ages 20 to 40. This pattern of morbidity was unusual for influenza which is usually a killer of the elderly and young children. It infected 28% of all Americans (Tice). An estimated 675,000 Americans died of influenza during the pandemic, ten times as many as in the world war. Of the U.S. soldiers who died in Europe, half of them fell to the influenza virus and not to the enemy (Deseret News). An estimated 43,000 servicemen mobilized for WWI died of influenza (Crosby). 1918 would go down as unforgettable year of suffering and death and yet of peace.

2) This swine flu virus could be the worldwide pandemic that WHO has talked about for sometime. The Spanish Flu early last century killed 40 million people.

3) Less people heading overseas keeps people here in NZ and they maybe buy a house.

4) Fear convinces people to head back to NZ – a shame the virus may already be here.

5) People tend to stay indoors and avoid contact of at all possible – so less economic activity.

This is going to be terrible for the entire world economy and could be far worse than we can imagine at this stage. People will not travel, they will stop spending money and this is going to put the brakes on an already stalled global economy.

Here is some research by the NZ Medical Journal of the possible impact of a pandemic outbreak:

“For incidence rates in the 15% to 35% range for the first pandemic wave, the modelling results give a range of 1600 to 3700 deaths attributable to pandemic influenza. The estimated range of hospitalisations was between 6900 and 16,200. The estimated number of cases of illness requiring medical consultation ranged from 325,000 to 759,000. For the peak week of an 8-week epidemic (35% incidence scenario), it was estimated that 42% of all public hospital beds would be required at least for some proportion of the week and that the average general practitioner would be consulted by around 80 people with influenza.”

For New Zealand, this scenario comprises:

* one or more waves of influenza;
* each lasting around eight weeks;
* infecting up to 40 per cent of the population;
* with a further 40 per cent of the population absent from work;
* killing two per cent of infected people (33,000 deaths, compared with upwards of 100 deaths per year from seasonal influenza; Ministry of Health, 2005).

Now if that is not evidence that the Government should be acting urgently re the Rangitoto School kids then I don’t know what is!

What’s the difference between bird flu and swine flu? – Swine flu is already transferring between humans rather than between animals and humans.

April 27 2009 | Uncategorized | 6 Comments »

March 2009 QV Statistics And New Zealands Housing Sales Volume

Christchurch

This is the latest Press Release from QV.

Property values in Christchurch decreased by 9.7% over the last year (calculated over the three months ending March 2009 in comparison to the same period last year), deteriorating further from the 9.1% annual decline reported in February. The average sale price for the city increased slightly from $344,816 to $349,442.

Melanie Holcroft of QV Valuations said; “The Central and Northern suburbs are holding as the strongest areas of Christchurch City, with the Eastern suburbs mirroring the Canterbury market.  The Hill suburbs have decreased from -8.1% in February 2009 to -9.9% in March 2009. The upper end of the market seems to be experiencing less activity compared to the middle and lower sections”.

“Property values since December 2008 continue to decline, although this appears to be at a slowing rate. Whilst the average sale price for Christchurch City shows a small lift, it must be kept in context as this data is easily skewed by normal market fluctuations and the mix of property being sold,” she said.

“The anecdotal signs of increased market activity with properties that are well priced continue on from last month, and buyers are showing plenty of interest in these. It should be noted however that the overall sentiment is still cautionary, with job security appearing to be the key driver affecting purchasing decisions. Local banks are also reporting a noticeable increase in pre-approvals, but this is still slow to filter through into market activity. We anticipate a slower market over the winter months, with current trends in line with seasonal behaviour,”Holcroft said.

Here is a snap shot of New Zealands Median Price for Property over the past 9 years.

Now here is the median for the same 9 year period in Christchurch.

The trend is very much the same.

Now the big change that agents have noticed is the drop in sales volume. Here is a graph from treasury that shows the drop in sales volume over the last two years and how it has changed.

As you can see there is a huge drop of with sales volume at about the time of the housing crisis in The United States which has evolved to the global credit crunch. But on the other side of this look at how steep the sales volume grew. This is post the 9/11 Twin Tower events which saw the number of migration of ex pats and new people to New Zealand grow at very fast rates as the graph below shows.

Now whether 9/11 was hoaxed by the Illuminati in a bid to change the world and protect certain people wealth or it was a real act of terrorism are still up for debate but the after effects have been more than anyone can detest. The jobs and employment from the upbeating of security was massive and in New Zealand the return home of thousands of New Zealanders pumped billions into the economy. But this caused the bubble that just kept getting bigger and bigger and created more and more debt. This debt is the real reason for the market the way it is. Now we have inflated prices with less capital and the same amount of debt.

When will the housing market start to move again.

Signs are already of more activity and there is a clear sign of migration numbers increasing as more people return home. These people have to live somewhere.

April 25 2009 | Buyers and Sellers and The Market | 1 Comment »

Anzac Dawn Services And Parade Times In Christchurch

Saturday 25th April 2009

As the years go by, the crowds at services commemorating ANZAC Day grow bigger every year, and the elements of gratitude and pride are becoming more apparent. The age range at Dawn Services, from babies to people in wheelchairs, reflects this.

People now attend the Dawn Service and other services for a lot more reasons than they have in the past. While they attend to honour the sacrifices made by family members and others in our community who have served during time of conflict, they now also do it to pay tribute for the peace which has ensued: people are very aware that the peace they now enjoy has been brought about by the sacrifices made.

A RNZAF Boeing 757 will fly over Cathedral Square at 6.55am, to coincide with the ending of the Dawn Service, and coffee and Anzac biscuits will be available for the public afterwards.

The Christchurch Tramway is also offering returned service people a free ride on the tram, as a sign of their respect for those who have served our country. For the duration of ANZAC Day, Saturday 25th April, any services people showing their service medals or other form of identification can board free of charge. In addition, at the completion of the Service, free trams will be available for anyone wishing to travel to the RSA in Armagh Street.

Below are details of all services in the city.

Air Force Museum, Harvard Avenue 12.00 noon

Akaroa War Memorial (meet at fire brigade station, 10.45am) 11.30am

All Saints Church, 305 New Brighton Road 11.00am

Citizens’ Service, ChristChurch Cathedral 10.00am

Dawn Service, Cathedral Square 6.30am

Diamond Harbour Memorial Hall (assemble at store, 10.30am) 11.00am

Halswell Domain, War Memorial 9.00am

Heathcote, Cnr Martindale and Bridle Path Roads 6.15am

Hei Hei, War Memorial 9.00am

Jane Deans Close, 20th Battalion, off Harakeke Street 9.00am

Little River Community Centre 9.30am

Lyttelton: War Graves Cemetery, Reserve Terrace 9.00am

Lyttelton Cenotaph (assemble at Port Company, 9.45am) 10.15am

New Brighton, Opp. New Brighton Working Men’s Club 9.30am

Papanui, St James Park, St James Avenue 9.10am

Paparua, Kirk Road Pharmacy, Templeton 10.15am

Prebbleton, Memorial, Springs Road 9.00am

Rolleston, assemble at new community hall 11.00am

Sumner/Redcliffs, Outside All Saints Anglican Church, 10.45am

Upper Riccarton War Memorial Library, 372 Riccarton Road 6.30am

Victoria Park, 19th battalion, assemble in carpark 7.45am

source: bethere.co.nz

image deleted

April 24 2009 | Uncategorized | No Comments »

Susan Boyle Has Got Talent

I watched this on Youtube and was amazed. She has the most stunning voice I have ever heard from one of these types of shows.Here is the link

I know this has got nothing to do with real estate but i just had to share this because being a singer myself I am quite amazed at her voice and I am sure you will too.

47 Year old Susan Boyle wows the judges with her performance in the auditions for Britains Got Talent, singing I dreamed a dream from Les Miserables.

Here are the Lyrics to the song.

I dreamed a dream in time gone by
When hope was high,
And life worth living
I dreamed that love would never die
I dreamed that God would be forgiving.

Then I was young and unafraid
When dreams were made and used,
And wasted
There was no ransom to be paid
No song unsung,
No wine untasted.

But the tigers come at night
With their voices soft as thunder
As they tear your hopes apart
As they turn your dreams to shame.

And still I dream he’ll come to me
And we will live our lives together
But there are dreams that cannot be
And there are storms
We cannot weather…

I had a dream my life would be
So different from this hell I’m living
So different now from what it seems
Now life has killed
The dream I dreamed.

April 22 2009 | Uncategorized | 1 Comment »

Points To Consider When Looking To Build A Green (Eco) Home.

Financially as well as environmentally, if you are building your own home, it is increasingly making sense to build eco homes. Done properly, not only are there huge running cost savings to be made from an eco build, but also an element of future proofing when it comes to current value and future resale value, if and when you come to sell.

For many though, providing a family-safe, non-toxic home and reducing the environmental impact while still enjoying the comforts of modern living remains the main motivation. It doesn’t mean you have to build with straw bales or rammed earth, though these are options; most successful eco builds are very conventional in appearance. But it is much more than just choosing environmentally friendly materials and paint.

The main priority should be designing a home which reduces energy use and therefore production of CO2 which is whats been blamed for climate change. Conserving water comes a close second.

Consider the following, especially if you normally worry about your car use, or the advent of cheap flights – these stats I found from the UK energy wise website.

* Homes in the UK use three times more energy than all our cars.

* Buildings are the fastest-growing source of the UK’s CO2 emissions, currently responsible for 46 per cent, with homes responsible for 27 per cent.

* More than half – 56 per cent – of water supplied is for households, and demand continues to increase.

* Energy use in non-domestic buildings is increasing as fast as fuel for air travel.

When you think of an eco home you need to look at all the angles. These include the location of the materials ie where they come from and how they’re transported. Who is making and transporting these materials and here do they get their training from. A big thing is are they local people so you are putting back something into the local economy.

Building an energy efficient eco house is highly technical, so it is important to check credentials and skills, which are currently in short supply. And you need to properly understand the concept. People are getting the wrong messages. Tacking stuff like a wind generator onto your roof won’t do it; you have to look at the fabric of the building, otherwise everything else is bolted on. Also if you build a 300 sq m mansion it can never be an eco build. Build to your limits.

If you’re building from scratch, even your dream home, it makes sense to consider its marketability should you want to sell. Meanwhile the social housing market already insists builders conform to various eco requirements, such as energy efficiency, as well as considering the local environment. One thing that is coming to New Zealand is double glazing in new builds.

Will it Cost More?

In the past as recently as the 1980s, we were limited by a very small supply of the materials alone. But things have changed. You can now build a low energy house as cheaply as you can build a standard house. There are now more and more places that will help you build an energy efficient home and as more and more people invest in these homes it’s becoming more affordable.

The building budget is always going to be an issue but you have to take into account cost over the lifetime of the property as well as the initial cost. That includes the running costs where owners can look forward to major savings. This is because at this time the supply is and manufacture of the materials to build and eco home are still not common.

Here are some of the things you should look out to do when you build a new energy efficient home.

* Insulation, throughout the house; make sure it is not compromised too by building construction, eg the accidental creation of ‘thermal bridges’ allowing heat to travel out; design should also include airtightness and ventilation.

* Water: conserve and minimise use of water. The average person uses 140 litres per day but should aim to reduce this.

* Energy: includes using natural materials such as wood for burning to heat water while renewable energy systems including wind turbines and solar panels.

* Lighting: should maximize the use of natural light, while energy efficient lighting is used throughout.

* Electrical appliances: eliminating the need for some eg providing a clothes natural drying space, while ensuring A++ energy efficient standard for others.

* Materials: consider those which are natural and from a renewable source; use locally grown timber; also more durable wood such as heartwood which reduces the need for preservatives. Look at the energy involved in production/transportation, and use manufacturers which can provide such information. Avoid PVC.

* Recycle or reuse where possible.

April 21 2009 | Buyers and Sellers and sustainable houses | No Comments »

Renting vs Buying – A Personal Perspective

Many people wonder whether renting or buying a home is better decision. Most of the time, history has shown it is a smarter financial move to purchase a home than to rent.  The final decision is unique to each situation of course. Here are a few points to note about both renting and buying.

 Buying

• May require a larger initial investment – the deposit (usually a mortgage is 20% of the sale price)
• You must be responsible for all upkeep otherwise value is affected
• If you want to move, your home generally must be sold
• Equity may go up, down, or stay stagnant depending on the home’s value
• Over time, the mortgage balance decreases and equity builds
• The ability to remodel and redecorate the home to match your needs and desires
• There can be tax advantages attached to home ownership

Renting

• Smaller amount of “up-front” cash
• When the lease is up, you can just move
• Costs for the term of the lease are more fixed
• Not gaining equity, but not losing it either
• Generally less work in maintaining a home or apartment
• Even if the property goes up in value, you will never gain equity
• Limitations on what you can do to “make it your own”
• No tax advantage to renting

Today we live in a more transient society. People move around a lot more with their jobs, are getting married later and want more flexibility with their living arrangements. There also doesn’t seem to be as much emphasis placed on the importance of having your own home.  Long term renting is becoming more and more common. A concerning reason for this trend is that it is becoming increasingly difficult to afford to buy a home, firstly save for the deposit and secondly be able to afford the mortgage repayments, especially in the major cities and more highly desirable and expensive areas. Housing affordability has increased from 2.1 times the average income to over 5 times the average income over the last couple of decades.

Under the cureent economic situation I have myself looked into buying another home. But for myself I cant get conventionally a 20% deposit as the eqity in my first home has fallen below the loan amount which I know has happened to many many people out there. Although this is not a problem for me bcause I do not intend to sell. The rent covers the mortgage payments and it works for me. But due to this I cant get another loan for another home to live in in Christchurch. So I have been forced with renting.

What I have found though is for my situation renting may not be the worst thing for me to do at the moment because housing prices are surely to come down further as this year unemployment and money problems worsen in this country. In saying that there has been some hugely increased sales volumes as of late. I am putting this down to the low interest rates where hungry cash ready investors see some good buys out there at a good interest rate. An investor friend of mine told me they were not worried if the price of the property dropped another 10% in value over the next year. They can see good returns at the current prices and the current interest rates to make it work. They also went on to say which is correct that the rice of property will go up again. A recession doesnt last forever.

If you are in my situation and find yourself unable to buy at the moment a house whether its your first or second or what and you find yourself haing to rent the best thing I think to do at the moment is find a relatively good priced property and cut your expenses down and save for a while. I believe the current cycle of good buying will not be over for some time. So if you sit down now and save you might be able to buy again when the horse is about to take off again. Thats what I am doing

April 19 2009 | Buyers and The Market | 1 Comment »

Westpac The First New Zealand Bank To Give New Zealanders A Mortgage Holiday

Finally there seems to be a little relief for those who are becoming financially stressed by this global economic downturn. Westpac is the first bank in New Zealand to follow Australia’s lead and offer 12-month mortgage holidays.The decision is part of the bank’s new set of measures to help financially stressed customers. Australia’s biggest banks are offering customers a 12-month holiday after pressure from their Prime Minister Kevin Rudd to go easy on those who had lost jobs and were struggling to pay their mortgage.

Prime Minister John Key said he welcomed the positive step to help those New Zealanders who had lost their jobs and still had to service their mortgage. Westpac New Zealand discussed its proposals with Mr Key before announcing it would offer customers new options of interest-only repayments and to extend the period of loan contracts.

But while many customers will welcome the new offers, Westpac acknowledged that postponing loan payments for any period would increase debt, and therefore may not be suitable for many borrowers. Mortgage holidays are nothing new. They have been around for some time and under special circumstances the banks usually will allow you to ask and try for one. But now the recent announcement is a step forward for people who are struggling a little more than they could have before. Its a step to helping people keep their homes in my view.

There are inherent dangers of mortgage holidays – for like all holidays they ultimately have to be paid for and would be careful in the way it applied the options.

Taking a holiday from your mortgage repayments certainly gives you a breather for a few months if that keeping that roof aloft begins to look a bit precarious, but to ensure your next intake of breath isn’t a sharp one, beware of the pitfalls. Missing payments can have a huge impact on future payments and the size of you overall mortgage.

Here’s what will happen to say myself in this situation;

• Taking just one year’s mortgage payment holiday.
• The price of the home dropping in value by 10 percent.

CASE STUDY

My house is worth $300,000 in todays market. My mortgage loan is for $270,000. So, I own 10 percent of my home at the moment. In one year, the 10 percent estimated drop means my home will be worth $270,000 the amount of my loan. If I add on the $15,000 I plan to defer on the mortgage that then means I owe $285,000 on the mortgage, but the home is now only worth $270,000 and I will owe $285,000 so that means I will have negative equity in the home. Meaning I will owe more on their home that it’s actually worth. This isn’s a problem if I don’t intend to sell but I probably wouldn’t be able to remortgage in future untill I get some equity in the home.

.
It sounds like a really terrible situation and sounds daunting and you have to look at both sides of the fence when thinking of taking the holiday. The most important action that can be taken in times of hardship is for you to talk with their bank early so that if you are in trouble the bank can help you make the best descision for your current financial situation.

April 11 2009 | Sellers and The Market | No Comments »

Mortgage Applications Rise Upwards

Here is an interesting article from the Herald Website:

Baby boomers are returning to the housing market in droves – but younger first home buyers are still doing it tough.

Mortgage applications last month were up 38 per cent compared to the same month last year, and were the highest monthly total since November 2007.

The information was supplied by credit information firm Veda Advantage.

Baby boomers (44-62 years old) in particular appear to be showing a disproportionate interest in the housing market, with a 45 per cent increase in mortgage applications on March 2008.

Generation X (28-43 years old) experienced a 34 per cent increase, while Generation Y (less than 28 years old) had the smallest growth with a 16 per cent increase on March last year.

“We are experiencing a level of activity in mortgage applications that we have not seen since house prices began falling in late 2007″, said Veda Advantage (NZ) chief John Roberts.

“This activity reflects the lower interest rates stimulating demand, and shows the market going to fixed terms to lock in these rates.”Roberts went on to say the much larger increase in the number of baby boomers applying for mortgages, compared to younger age groups, suggests that they are more cashed up and in a better position to snap up perceived bargains in the housing market.  Generation Y have increased only marginally over March 2008

My take on this is people in general have been taking advantage of the lower interest rates avaliable at the moment. But the big point to consider is that now because of the lending criteria being so tough ie 20% it is hard for the younger people (gen y) to get the loan. Naturally the older generation of people have a bit of money behind them, possibly in equity and or savings. Leaving the younger generation with out of the equation.

Most of the older generations of people (generation X and the Baby Boomers) will probably have their own properties already and could be buying an investment property to fill up their nest egg for retirement.

My question to you is… Due to the current trend we are seeing here are we going to see a huge influx of rental properties come up for rent soon and in 10 to 15 years time when these older generations come to retirement and cash in their nest eggs, are we going to see this influx of rental properties come to the market again?? Makes you think doesnt it.

April 07 2009 | Buyers and The Market | No Comments »

What is Sustainable Housing – Or A “Green House”

Over the next few weeks I will be talking about the new craze thats hitting the world and that is “GOING GREEN”. With so mnay of us concerned about global warming and how we are now impacting our planet by the day to day running of our lives it is important to note a few things about what we can do to help.

I have decided to have a look into this and do some research. Going green in the context of Real Estate is one that we should start with. The G20 summit last week talked about how we can work on climate change. Thats how important it is seemed to be. But there ha to be a place to start. I believe this place is in our homes. If we can live in a home that is warmer and drier we can have added benifits to our lives that include less power consumption and healthier lifestyles and many other things.

We will be re looking back at the series I wrote on The New Zealand House and looking at each house to see how they can be made warmer, drier, and more sustainable to the environment. I will also cover if you a buiding a new home how you can make the most of a range of products out there.

Wikipedia’s web definition of Sustainable Housing is:

A sustainable building, or green building is an outcome of a design which focuses on increasing the efficiency of resource use — energy, water, and materials — while reducing building impacts on human health and the environment during the building’s lifecycle, through better siting, design, construction, operation, maintenance, and removal.^[1]

Green buildings are designed to reduce the overall impact of the built environment on human health and the natural environment by:

• Efficiently using energy, water, and other resources
• Protecting occupant health and improving employee productivity
• Reducing waste, pollution and environmental degradation^[2]

I like to look at sustainability as the concept of meeting the needs of today without compromising the needs of future generations. This saying has been around for many years but in my view has been very slowly uptaken in the sector of housing.

It is my opinion that we have some of the poorest quality homes here in New Zealand compared to other countries that we usually class as equal to us. Recently I was looking at some homes for some of my university friends of mine to rent out for the year. There were so many houses to choose from. We went through probably 50 homes in two weeks to find something that fitted the needs of everyone. But to be quite homest I was disgusted at the state of some of the homes.

There needs to be something done to both have newly built sustainable homes and have our exsisting homes turned into more eco greener homes. Some of the properties I looked at were colder inside than outside and had condensation problems, rot, mold, drafts…. you name it they exsisted. Its a shame that landlords have the cheek to offer people to live in these properties. They would make you ill.

Hopefully in the next few weeks I can point out what I believe is some of the key points that exsisting and new homes need to be more green. Like everything there is the two ends of the scale – hard out and conservative. I want to demonstrate more toward the conservative end of the scale what can be done simply to make a house a more greener healthier place to live.

If you have any ideas or comments please leave them as I would love to answer them.

April 05 2009 | sustainable houses | No Comments »

Recession Tips To Keep You With More Money In Times Of Need

We are in A Recession. New Zealand has now had 5 quarters of negative growth. Export Manufacturing is down 25% on last year alone. At the end of the day there is less cash floating around to be shared with everyone. Here are a few things that may help when it comes to surviving the recession if your finding it hard.

• Stick to a monthly budget
• Refrain from buying expensive items on credit
• Set up a fund for emergencies (at least two months income)
• Try to add the maximum amount allowed to your pension/retirement fund
• Stay healthy with a proper diet and exercise program (This is a preventative measure that will reduce the cost of prescription drugs and other health-related costs)
• Pay down debts
• Purchase with cash
• Buy groceries in bulk utilizing coupons whenever you can
• If you have teenage children who are receiving an allowance, determine if they can apply for a part-time job after school – but employment is becoming harder to find.
• Increase your deductibles on car and homeowner’s insurance
• Keep your automobile well-maintained
• Winterize your home and use energy-efficient appliances and light bulbs
• Walk whenever possible instead of driving to a local store

Anything you can do to reduce the amount of expenditures can only help you through this economic downturn.  In the meantime, stay calm, focus on your budget, and save as much as you can.

April 03 2009 | Uncategorized | No Comments »

New Zealand Economic Overview March 2009

Summery of New Zealands economy for the quarter March 2009

The NZ economy is yet to find a base. Business confidence surveys are either at, or near, historical lows. Employment intentions are tumbling and investment plans are being shelved. Corporate tax revenue – a key timely indicator of economic activity – has capitulated. Consumer sentiment is also very subdued despite falling mortgage rates, tax cuts and lower petrol prices. Car registrations are at their lowest level since 1994 and building consents in January fell to their lowest level since 1965. It is now likely that the recession, which began in the March 2008 quarter, will extend to five, possibly six, quarters as the full impact of recent financial market turbulence is felt. This has been exacerbated by the global downturn and follows a largely domestic and drought driven recession over the first half of last year. The last time NZ experienced such a string of negative quarters was during the oil shock of the 1970s.

Of course the positive spin on this is that we are close to the turning point, considering it is now the end of March. We have some sympathy for this view in terms of the pure numbers and the reality that the bungy-cord tends to come out, which is already manifesting in the housing market with reported uplifts in enquiries. But we also need to be realistic: 2008 was by-and-large a domestic induced recession in response to internal imbalances, a drought, and tight financial conditions. 2009 will have an added global influence.

On top of this, we would be inclined to throw some statistical quirks into the mix. Technically, NZ was in recession in H1 2008 but weakness was heavily concentrated so it didn’t really feel as weak as the normal recession. By late 2009, NZ’s GDP figures are likely to show a rebound into positive territory, but it will be out of sorts with other measures such as the unemployment rate, which is still headed higher. Hence, the H2 2009 rebound will not feel like a recovery at all.

The outlook for 2009 is dominated by four dynamics. These include:

• A credit centric shock. Despite signs that global credit spreads have eased and major central banks are embarking on quantitative easing to keep longer dated yields down, credit markets are still far from normal. It is no longer a question of price. We are in a world where capital is scarce, and this is not about to change for some time.
• A deep global recession, which started at the end of last year and is set to last throughout most of this year.
• A structural change in the pricing of risk, with a clear shift in the balance of power away from borrowers and towards savers and investors. NZ is already seeing this via changes in retail deposit rates, which now sit materially above the wholesale interest rate curve.
• NZ’s heavy reliance on offshore capital, which is evident via a large current account deficit and large net external liability position. The latter, at 93 percent of GDP, is a key source of vulnerability in the current global environment and needs to be reduced.

These issues above manifest in our forecasts via a number of avenues:

• A structural rebalancing for the economy away from debt-fuelled consumption towards more earnings centric growth (i.e. exports). This sees anaemic consumption growth for a number of years and a sharp improvement in the household savings rate.
• An elongated adjustment process, particularly with household balance sheets in most need of repair.
• A requirement for the currency to weaken markedly, and stay low for some time to assist in the rebalancing process.
• The economy to remain void of key engines of growth over 2009, as the combination of de-leveraging restrains the domestic economy, and the flow-on from a weak global environment restricts the earnings sector.

We expect the NZ economy to contract by 2.8 percent this year. By-and-large this reflects the big-picture forces noted above. Confidence remains weak, and we are only now starting to see the flow-on impact from the global scene. As these effects take hold via weaker export demand, falling tourism numbers and lower commodity prices, the recession naturally shifts from its urban focus towards the hinterland. We have already seen residential property prices fall by close to 10 percent from levels a year ago. This year will see much weaker rural land prices in response to a lower dairy payout. The lower payout and land prices will be the main transmission mechanism through which the global recession filters through into the rural regions.

Consumers are no longer the main driving force for growth. Consumption growth may be the weakest it has been since the early 1990s, but we fully expect more weakness to come in the near-term. Household cashflow may be improving thanks to lower mortgage repayments and tax cuts, but the deteriorating labour market and rising unemployment rate (we are forecasting close to 8 percent by the middle of 2010) increase the likelihood that households save any windfall gains, rather than spend them. Despite record low interest rates providing support to cashflow, the aggregate household debt servicing burden relative to income remains around 14.3 percent, well above its historical average of 9.6 percent. Improving this ratio towards historical norms has to come from a lower stock of debt. Negative wealth effects from falling house prices (we forecast a peak to trough decline of 25 percent in real terms) and tighter access to consumer debt are also acting to curb consumption growth, particularly for durables. But even when the economy starts to recover from 2010, we fully expect consumption growth to lag the overall economy. This is part and parcel of the rebalancing process, which sees consumption as a share of GDP fall from its current lofty 62.3 percent towards the historical average of around 59 percent. We are forecasting a 1.4 percent fall in consumption for this calendar year, and only a mild 0.7 percent growth next calendar year.

Businesses will do it tough, as both domestic and external demand wanes. Profitability is well down and firms have already responded by a freeze on hiring and investment at the end of last year. Firms exposed to domestic demand (e.g. retail and housing) have fared poorly as the recession intensified, but increasingly it will be exporters that will feel the effects of the global recession in the form of reduced or cancelled export orders. Thankfully, business sector balance sheets are healthy. But with topline revenues continuing to head backwards, the recession lasting longer than normal and balance sheet preservation becoming a priority, the onus will increasingly turn towards costs in order for firms to stay profitable. We foresee negative employment growth throughout 2009, and likewise for business investment. The latter will reduce the potential growth rate of the economy, and hamper the eventual recovery when it comes. Employment and investment intentions already sit at historical lows, and these are the next leg of the cycle to watch.

It’s not all depressing news. We are aware of certain pockets that continue to perform well. NZ’s macro framework has responded via interest rate cuts, expansionary fiscal policy and a lower currency. NZ’s financial system remains sound, a major differentiating factor from the United States and other nations. But all are within the context of the deepest global recession in half a century. NZ still stands out as being vulnerable given our reliance on exports and offshore capital. We are also mindful that monetary policy is rapidly losing traction given fierce competition for deposits and funding in general. And pressure on the Government to maintain our sovereign credit rating means they cannot simply go on an unfettered spending or tax cut binge.

Despite the pressure on businesses, we need to remain mindful that a household debt correction story is at the heart of this economic cycle. It is household balance sheets that need to be repaired. Household debt to income increased from 60 percent to close to 160 percent between 1991 and 2008. Debt servicing increased from 8 percent of disposable income to over 14 percent currently. Housing represents 75 percent of total assets. These dynamics were a reflection of the “old” macro environment where credit was cheap and freely available. This allowed NZ to run large current account deficits. In fact, when you overlay cumulative current account deficits over the past decade with home lending, the relationship is startling.

We are in no doubt that we will see the odd burst of activity, particularly in relation to the housing market, which seems to be occurring already (albeit off a very low base). But we struggle to see it taking hold given the global backdrop, turn in the labour market, and weaker appetite to lending per se. It is simply not credible for NZ to expect to borrow and spend its way out of the current jam.

The seeds of the long awaited current account adjustment have been sown. We see the 8.9 percent annual deficit recorded in December 2008 as the peak, with improvements to come from here on in. But rather than via better export performance, the improvement in the current account initially will be via lower profits generated by foreign owned firms in NZ and a lower overseas debt servicing burden, together with reduced import demand as a result of weak domestic demand growth.

A weaker currency is a prerequisite to the adjustment process and the improvement (and recovery) taking on a sustained look. With fiscal policy somewhat constrained in its ability to provide additional counter-cyclical support and monetary policy losing traction given the reality that borrowing rates are being determined by aggressive competition for deposits, the critical shock absorber that must adjust is the currency. Years of the currency remaining above its historical average has led to a deteriorating goods and services balance. We simply see the reciprocal going forward, as the currency follows its normal path of moving further than what is typically expected as the adjustment takes time. This has already occurred, and together with weak consumption growth curbing import demand, we envisage a return towards surplus in the goods and services balance by the end of this year. It’s essential for providing some much needed spine and balance to growth, particularly given the de-leveraging process we envisage for the household sector. We also should not forget that while commodity prices have fallen, the net effect has been muted via the terms of trade, and this is in fact giving us some comfort towards a better medium-term story for New Zealand.

We will be looking at a broad array of indicators over the coming months in terms of any recovery. We are in no doubt that we will see a recovery. Natural population growth, improved migration and easier monetary conditions are support factors that will gain traction as the global scene gradually improves. Business and consumer confidence, along with dwelling consents will be key to watch. But not until we see a sustained improvement in structural indicators; such as the ratio of consumption as a share of GDP, better mix to imports (more investment, fewer consumption goods) and improved savings rate; can we look towards any recovery taking on a sustained look. This looks a way off still.

The economy will come out of recession in the second half of the year, but a sustained recovery will be a mid-2010 story. Though we expect positive growth rates from the second half of this year, it will not feel like a recovery initially. Indeed, growth will be subdued heading into early 2010 as the economy remains in the de-leveraging process. It will not be until mid-2010, by which time the unemployment rate would have peaked and the global economy has started to mend, that the economy will embark on a sustained recovery and start posting strong quarterly growth rates. Pend up demand will fuel the initial rebound, as building consents play catch-up to underlying housing demand, consumers replace durable goods, and businesses upgrade their depreciated plant and machinery equipment. All are natural pro-cyclical forces that once unleashed will see the economy temporarily expanding well above its trend growth rate.

And let us not forget the Rugby World Cup being held in NZ in 2011. Preparations in the lead-up for the event will further add to activity, and we can expect a surge in visitors for the event, leading to a boost in services exports. We see the economy performing strongly in 2011.

Don’t forget the medium-term story. The sacrificial lamb in a de-leveraging environment is growth. Reality needs to set in as it’s a process that will take time. But the medium-term outlook remains strong. NZ still producers the goods (and services) that the world (increasingly Asia) demands and this sets us in good stead for the future. The rebalancing away from the spending towards the earnings sectors will put the economy on a firmer footing to grow at a more sustainable fashion. As firms get back to basics and focus on what they do well (and get assistance via small changes in the microeconomic arena) the seeds of better productivity growth are being sown. This is a dynamic we are already detecting and expect to become more pronounced as the year moves on.

source: National bank of New Zealand

April 02 2009 | The Market | No Comments »

NZ Banks Reduce Interest Rates To 2% In A Bid To Stimulate The Economy

Today’s shock announcment comes after the government and Reserve Bank of New Zealand get together and force all the major banks in New Zealand to reduce their interest rates in order to stimulate some life into our economy. Now is a good time to get some cheap money and buy a house for yourself.

Read more of this breaking story here

April 01 2009 | Uncategorized | 2 Comments »