Our Housing marketis in worse shape than Australia’s but is also likely to avoid as deep a correction as in the U.S. and Europe. The Reserve Bank of New Zealand has cut 575bp since July 2008 to 2.5% in April 2009 but longer-term, fixed mortgage rates have recently begun to rise again due to expectations of a quick recovery and higher interest rates. Fiscal policy has been laissez-faire towards the recession, opting merely for tax cuts as the government would rather not stand in the way of the economy’s structural adjustment. With housing assets 5.7 times the household disposable income, New Zealand property markets are even more leveraged than their U.S. counterparts.
House prices fell 8% in 2008 and are down 9.2% y/y as of April 2009. Some analysts believe the housing market will bottom on an annual basis in 2009. The housing market has already bottomed on a month-over-month basis, with the median price rising from $325,000 in January 2009 to $340,000 in April.
Immigration has revived housing demand and sales have been strongest in the low-end segment thanks to increased affordability. However, new building starts and new home sales remain below the boom levels of 2004 and will likely remain so due to credit constraints, rising unemployment and sluggish economic growth in the year ahead.
To have a detailed look at what has been said about the rest of the world and the state of their housing markets visit this site.
Source: RGE
May 28 2009 | The Market | No Comments »
Lets start 2009 with a little less bad news from the economys point of view. We are now starting to see some of the effects on the credit crunch and how it is affecting the spending habbits of New Zealanders. In November New Zealand household borrowing fell for the first time in 17 years. This is a direct result of the recession and global market turmoil.
The Reserve Bank of New Zealand said seasonally adjusted total household borrowing fell 0.1 percent to NZ$174.3 billion last month, after a 0.2 percent rise in October. It was the first monthly decrease since the records began in 1991.
This year has seen a marked slowdown with consumer spending falling sharply due to the high interest rates, food and petrol costs increases and a slowing housing market. We have been in a recession since the beginning of the 2008, and many forecasters believe the downturn will continue until the middle of 2009. But all is not bad news from all this slow down. In 2008 alone the Reserve Bank cut the OCR by 325 basis points. And is likely to fall further on January 29th when the RBNZ meet again.
It is interesting to see this data and look at the bigger picture. There is no doubt that 2009 if looking at these statistics will be a slow year for the economy as consumers spend less and have less to spend.
January 01 2009 | The Market | 1 Comment »
BNZ is throwing down the gauntlet to other banks in slashing its lowest mortgage rate today to below 7 per cent.
The ‘mortgage rates war’ was a key battleground four years ago when BNZ and ASB went at it hammer and
tongs in the spring of 2004.
That tussle over 2 year fixed rates gave the housing market a second wind that did not run out until the end of 2007 and hamstrung the Reserve Bank’s efforts to slow the economy.
The difference this time is that the battle is around the variable and 6 month rates and could restore some the Reserve Bank’s monetary policy powers and lift the economy as it heads towards a difficult 2009.
BNZ has announced a new 6.99 per cent 6 month mortgage rate that makes it the lowest in the market, beating even Kiwibank’s lowest rate of 7.29 per cent for one year and Westpac’s lowest rate of 7.19 per cent for 18 months. ANZ and National’s lowest rate is 7.3 per cent for one year, while ASB’s lowest rate is 7.35 per cent for 6 months.
BNZ’s new one year rate is 7.29 per cent, down from 8.29 per cent, while its 2 year rate is 7.35 per cent, down from 8.29 per cent.
This latest competitive first strike ahead of an expected 100 basis point cut in the Official Cash Rate next Thursday to 5.5 per cent has increased the competitive intensity that is likely to drag many 2 and 3 year fixed rate borrowers down towards a 6 month or variable rate as interest rates drop quickly. Most economists see the OCR falling as low as 4 per cent next year, meaning the variable and short term mortgage rates are likely to drop to 6-7 per cent.
Some economists, including Goldman Sachs and Deutsche Bank, are now forecasting a 150 bps cut on December 4.
Source: New Zealand Herald Online
What does this mean for us – the consumer?
Well the big thing is a saving in your mortgage which in the current economic times is going to help so many people in New Zealand. On top of falling mortgage rates we have falling petrol prices, falling commodity prices. But it doesnt just stop there. The total global downturn means the price of everything goes down such as our New Zealand Dollar which is hovering around the .50c USD mark. Our houseprices are no exception. With many houses dropping in value of up to 10% and some predict even more, some people are struggling to find the cash they once had to make the moves or fund things in the way they used to before.
This is a testing time for many people but the big thing today is that interest rates are falling. We will be recieveing more tax cuts from the national government and a big thing for many kiwis over the summer fuel is alot cheaper. Many people are sitting tight as interest rates are expected to fall further. Talk to a mortgage broker if your financing at the moment. They can offer great sound avice for the future. It is an interesting and will be a tough road ahead but I am sure if we remain smart we can ride this financial storm out alright.
November 24 2008 | Buyers and Sellers and The Market | No Comments »
On the 5th November 2008 America Voted in Change with Barack Obama and on the 8th November 2008 New Zealand Voted in change with John Key. A huge symbol of what the world wants and is looking for. At a time when the world seems to be swinging towards governments which are more like our Labour Party, New Zealand voted against this trend and elected in a National Party. This symbolises the overwhelming want for change over party policies.
John Key and Barack Obama both (47) told us in their victory speeches that they have been voted in as a government of change. But the economy in New Zealand faces a difficult year ahead. Key’s election is unlikely to see any dramatic policy shifts in either domestic or foreign policy. This will come as no surprise as the two major parties had similar views on most things. The Major advantage National had in this election was the global trend for change which national capitalised on very well.
Key worked for Merrill Lynch from 1995, first as its head of Asian foreign exchange in Singapore, then as head of global foreign exchange in London. He returned to New Zealand in 2001.
John Key campaigned on the strength of his financial background in an election dominated by economic issues. Our economy has entered a recession and jobs are been lost as growth slows across the Asia-Pacific region in the wake of the global financial crisis. This all comes after a boom that had started in 2000 and kept Helen Clark’s Labour party in office for nine years.
A friend of mine Steve Korber who has been in Real Estate a long time says “Based on my experience of previous election results, the win by National will give the real estate market a short term lift in confidence. A combination of factors, including falling interest rates and more affordable housing should also serve to stabilize the market between now and the end of the year. I expect sales volumes will increase about 10 – 20% compared to historically low numbers over the past few months.”
Just like John Key said last night in his victory speech we have a bumpy road ahead of us. The worlds financial situation is fairly shaky and volatile at the moment. There are industries closing down, people losing millions on the share market but nothing can take your property investments from you. Property will not normally vanish and the fact of the matter is everyone needs a place to live. Through the financial challenges the world is experiencing at the moment property will come out been strong. It always does.
There are many opportunities out there at the moment and this is the time to take hold of them and snatch them up. Confidence is needed and that’s what I think this country has elected in. John Key feels comfortable with money and the number one issue now is the financial state of the country and John Key had a confidence about him that makes many people feel safe. Now we just have to trust he does the right thing for this country.
Well done to John Key and the National Party on their victory. Let’s make this country a great place for all New Zealanders. Also Good Luck to our outgoing Prime Minister Helen Clarke. Big Change is also closing in on the Labour Party with both Helen Clarke the leader and Micheal Cullen the deputy resigning from their positions. So no matter how you look at it there are interesting times ahead for all.
November 09 2008 | Uncategorized | 1 Comment »
You have no doubt heard of the “Baby Boomers”, those individuals born between 1943 and 1963. I have written about them and also about their offspring, generation X and the ones after that named generation Y.
This is a topic that interests me with a great deal of enthusiasm. The baby boomers are coming to the age of retirement. I am starting to see in my business many older people move into retirement villages. These seem to be great ideas and serve a fantastic purpose for what they provide. I am constantly reading and today Icome across an article that I want to share parts what it was saying.
Following World War II, Australia’s population grew at record levels. Australia was not alone in this phenomenon. The United States, New Zealand and Canada all experienced Baby Booms at a similar time.
The Baby Boomers are an important phenomenon to understand. They have had dramatic effects on society and will substantially impact the way the stock market performs over the next 20 years. For this reason, it is important to understand some of the background on this interesting group of people.
As mentioned, the Baby Boom was experienced in various countries around the world. Part of the reason for the “Boom” was that these countries were immigrant receivers and immigrants tend to be in their 20’s, the prime childbearing years.
At its peak in 1957, the US boom hit 3.7 children per family. Canada hit its peak in 1959 with Canadian women averaging 4 offspring each; that was over 479,000 new births that year alone! Australia’s boom was not quite as big as the Canadian or US booms; however, we still have a disproportionate number of people who are today in their 40’s and 50’s. Following the Baby Boom, we had a Baby Bust. Far fewer children were born during the late sixties, leaving Australia with an asymmetrical population graph.
The Baby Bust group, born between 1964 and 1976 are a much smaller group than their predecessors and are commonly referred to as Generation X.
Baby Boomers are a very significant and important group. It is not that, individually, they aren’t any different than any other group who preceded them; it’s just that there are so many of them. Due to their large numbers, Baby Boomers have had a significant impact on our society, making substantial changes as they grew. They have changed the economy, driven housing and other markets and transformed social attitudes and lifestyles.
In Australia and North America today, the fastest growing industries, apart from technology, are financial management, leisure activities and health care. It is very easy to see why. Boomers have been working all their adult lives, usually for someone else. They have raised their children and are now focusing on their retirement. They have had a magnificent time. They have not endured wars, or a depression like their parents and grandparents. They have enjoyed fantastic luxuries such as cars, world holidays and computers. They have been at the forefront of the age of discovery.
Unfortunately, the majority have not prepared themselves financially for their retirements, believing instead that like their parents, they would enjoy a comfortable pension from their employers and/or government.
The stark realities are now coming to light. Everybody, especially the Boomers, must take responsibility for their financial futures. Our government will simply not be in a position to provide adequate pension incomes for a growing number of retirees. Today, for every person who is retired, there are four people working, providing income to the government. By 2025, there will be only 2 people working for every retiree. What’s more, the Boomers, as they start to retire, will live longer than any group before them, well into their 70’s and 80’s on average. As a result, it is up to each of us as individuals to take responsibility of our own personal financial planning.
Read more about this by the original ideas at this website
The Australian government has made substantial improvements and preparations for the growing populations. They have introduced a compulsory superannuation scheme that all employers and employees must participate in and which is gradually rising in required contributions, but it will be too little, too late. The key to investment growth is time, a luxury many Boomers no longer possess.
Consider this fact, that at a return of 8% per annum, net of tax, an investment of $30,000 would require over 15 years to triple in value, not even considering the effects of inflation. Most investment strategies commonly promoted to the public boast returns of 4% to 10% per annum. We often see managed funds, superannuation schemes, bank term deposits and property investments offering such results. Many people consider these returns appropriate and even good! Unfortunately, many members of the public require a much greater return on their investments to adequately improve their financial positions before they retire (if they can ever afford to!).
There are going to be so many opportunities open up in the next few years in the void of this huge population group. Its an exciting time for a Gen Yer and a Gen Xer coming up.
November 05 2008 | Buyers and Sellers and The Market | 8 Comments »
