1 00:00:00,120 --> 00:00:03,080 Speaker 1: It's challenging. I think for the investors out there, the 2 00:00:03,120 --> 00:00:06,600 Speaker 1: maintenance costs, the insurance costs in particular, and of course 3 00:00:06,640 --> 00:00:09,879 Speaker 1: the council rates just bang bang bang. I certainly expect 4 00:00:09,920 --> 00:00:12,520 Speaker 1: house prices to go up. I mean where they sit 5 00:00:12,640 --> 00:00:15,560 Speaker 1: on average at the moment is basically exactly where they 6 00:00:15,560 --> 00:00:18,800 Speaker 1: were four years ago, so early twenty twenty one, by 7 00:00:18,840 --> 00:00:21,720 Speaker 1: our lookers. For the economy to improve, when does that 8 00:00:21,880 --> 00:00:25,759 Speaker 1: lead to people's feelings about the labor market changing? When 9 00:00:25,800 --> 00:00:28,320 Speaker 1: do people feel a greater amount of job security? 10 00:00:31,400 --> 00:00:34,360 Speaker 2: Cura and Welcome to Shed Lunch, brought to you by Shehz's. 11 00:00:34,560 --> 00:00:37,920 Speaker 2: I'm Helen Madison. Today on the program, we take a 12 00:00:37,960 --> 00:00:41,680 Speaker 2: pulse check of the property market. Will more interest rate 13 00:00:41,800 --> 00:00:44,640 Speaker 2: can'ts revive house prices that have been down more than 14 00:00:44,680 --> 00:00:48,519 Speaker 2: twenty percent in some regions, or will investors and sellers 15 00:00:48,880 --> 00:00:52,959 Speaker 2: be disappointed? Independent economist Tony Alexander has been mulling over 16 00:00:53,000 --> 00:00:56,440 Speaker 2: the numbers and the sentiment before we dive in. Here's 17 00:00:56,440 --> 00:00:58,720 Speaker 2: some important information for you to consider. 18 00:00:59,280 --> 00:01:02,280 Speaker 3: Investing in risk you might lose the money you start with. 19 00:01:02,640 --> 00:01:06,360 Speaker 3: We recommend talking to a licensed financial advisor. We also 20 00:01:06,440 --> 00:01:10,400 Speaker 3: recommend reading product disclosure documents. Before deciding to invest. Everything 21 00:01:10,400 --> 00:01:12,480 Speaker 3: you're about to see and hear is current at the 22 00:01:12,480 --> 00:01:13,280 Speaker 3: time of recording. 23 00:01:13,560 --> 00:01:16,160 Speaker 2: Welcome Tony. Great to see you in person in the 24 00:01:16,240 --> 00:01:17,600 Speaker 2: studio for the first time. 25 00:01:17,920 --> 00:01:20,240 Speaker 1: Yes, yes, now it's good to be here in person 26 00:01:20,360 --> 00:01:22,920 Speaker 1: rather than just down the remote camera from Australia. 27 00:01:23,000 --> 00:01:27,440 Speaker 2: Sometimes. That's right, let's get into it. Then, interest rates 28 00:01:27,600 --> 00:01:30,120 Speaker 2: are on the downward cycles, and I know you've said 29 00:01:30,160 --> 00:01:33,440 Speaker 2: before that you think the cuts that we're having will 30 00:01:33,480 --> 00:01:37,120 Speaker 2: finish or bottom out mid twenty twenty five. Last week 31 00:01:37,160 --> 00:01:39,160 Speaker 2: the Reserve Bank did what we thought it would do 32 00:01:39,360 --> 00:01:42,119 Speaker 2: and they reduce rates by fifty basis points. So we're 33 00:01:42,160 --> 00:01:45,880 Speaker 2: three point seventy five anything in that monetary policy statement 34 00:01:45,920 --> 00:01:49,000 Speaker 2: which a company. That announcement has made you think differently 35 00:01:49,080 --> 00:01:50,360 Speaker 2: from where the bottom might be. 36 00:01:51,560 --> 00:01:54,480 Speaker 1: Well, previously I thought maybe three point five percent would 37 00:01:54,480 --> 00:01:56,520 Speaker 1: be the bottom. But the Reserve Bank, first of all, 38 00:01:56,560 --> 00:01:59,640 Speaker 1: they brought forward in time by about a year when 39 00:01:59,680 --> 00:02:03,240 Speaker 1: they see monetary policy reaching its bottom, and the low 40 00:02:03,280 --> 00:02:06,000 Speaker 1: point they've got there is either three or three point 41 00:02:06,000 --> 00:02:08,800 Speaker 1: twenty five percent. In the document it says three point 42 00:02:08,840 --> 00:02:10,840 Speaker 1: one percent. Well, we're not going to get three point 43 00:02:10,880 --> 00:02:12,920 Speaker 1: one percent. It's going to be three or three point 44 00:02:12,960 --> 00:02:16,160 Speaker 1: twenty five, and I think they've given a strong benefit 45 00:02:16,280 --> 00:02:19,600 Speaker 1: of the doubt to the upturn they see in the 46 00:02:19,639 --> 00:02:23,960 Speaker 1: economy not really driving much inflation. So maybe three point 47 00:02:23,960 --> 00:02:25,880 Speaker 1: twenty five percent, I guess, is where I think we're 48 00:02:25,880 --> 00:02:28,040 Speaker 1: going to see the bottom the for the official cash rate, 49 00:02:28,320 --> 00:02:30,519 Speaker 1: and chances are that's going to be around near the 50 00:02:30,560 --> 00:02:30,960 Speaker 1: middle of the. 51 00:02:31,000 --> 00:02:35,040 Speaker 2: Year, so similar to what you saw before. What about 52 00:02:35,160 --> 00:02:37,560 Speaker 2: house prices though, because this seems to be quite a 53 00:02:37,600 --> 00:02:40,680 Speaker 2: bit of optimism out there that these this downward cycling 54 00:02:40,800 --> 00:02:43,520 Speaker 2: rates will actually lift prices, which, as we know, have 55 00:02:43,600 --> 00:02:47,040 Speaker 2: been down They've been twenty percent in some places. What's 56 00:02:47,080 --> 00:02:49,560 Speaker 2: your view on where house prices are going, because you 57 00:02:49,560 --> 00:02:51,359 Speaker 2: have seen one stage they could even go up. 58 00:02:51,639 --> 00:02:54,720 Speaker 1: Yeah, yeah, well, I certainly expect house prices to go up. 59 00:02:54,880 --> 00:02:57,160 Speaker 1: I mean where they sit on average at the moment 60 00:02:57,400 --> 00:03:00,440 Speaker 1: is basically exactly where they were four year years ago, 61 00:03:00,520 --> 00:03:02,919 Speaker 1: so early twenty twenty one, when we're already seeing a 62 00:03:02,960 --> 00:03:05,320 Speaker 1: bit of a surge with the pandemic and very low 63 00:03:05,360 --> 00:03:10,120 Speaker 1: interest rates and Alvir's gone et cetera. Just recently, when 64 00:03:10,160 --> 00:03:12,639 Speaker 1: I look at the data from ARII and Z in particular, 65 00:03:12,840 --> 00:03:15,480 Speaker 1: it seems to me they're not really going anywhere quite frankly. 66 00:03:15,919 --> 00:03:18,919 Speaker 1: We saw a bit of a movement upward twenty twenty 67 00:03:18,919 --> 00:03:21,120 Speaker 1: three with the first home buyers going into the market, 68 00:03:21,160 --> 00:03:23,680 Speaker 1: and then that sort of faded away, and again in 69 00:03:23,720 --> 00:03:26,040 Speaker 1: twenty twenty four. We saw a bit of a movement 70 00:03:26,120 --> 00:03:28,919 Speaker 1: upwards around about the middle of the year July, August, 71 00:03:28,960 --> 00:03:31,800 Speaker 1: et cetera, when talk a rows of interest rates going down, 72 00:03:32,080 --> 00:03:35,000 Speaker 1: but that sort of faded a bit over summer as well. 73 00:03:35,080 --> 00:03:37,200 Speaker 1: So for the moment, I'd say the market is flat, 74 00:03:37,440 --> 00:03:40,760 Speaker 1: but I would expect, yes, interest rates going down, people 75 00:03:40,840 --> 00:03:42,840 Speaker 1: rolling on to low interest rates for out a bit 76 00:03:42,880 --> 00:03:44,880 Speaker 1: of cash. It's going to be I think when people 77 00:03:44,880 --> 00:03:47,680 Speaker 1: have a bit more confidence about their jobs, the labor 78 00:03:47,720 --> 00:03:51,320 Speaker 1: market improving, that's maybe more when it's reasonable to think 79 00:03:51,360 --> 00:03:54,080 Speaker 1: about we're going to have a long string of small 80 00:03:54,120 --> 00:03:55,640 Speaker 1: increases each month coming along. 81 00:03:57,280 --> 00:03:59,920 Speaker 2: It does seem to be maybe anecdotally, a lot of 82 00:04:00,200 --> 00:04:03,160 Speaker 2: listings out there at the moment, and I do wonder 83 00:04:03,200 --> 00:04:09,000 Speaker 2: whether it's about sellers are readjusting their expectations when it 84 00:04:09,040 --> 00:04:11,520 Speaker 2: comes to price, because it would appear that it's a 85 00:04:11,520 --> 00:04:15,120 Speaker 2: bit of a buyer's market and that sellers really maybe 86 00:04:15,120 --> 00:04:17,480 Speaker 2: can't get what they thought. They did. Look this week 87 00:04:17,520 --> 00:04:21,560 Speaker 2: at Ryman Healthcare, the retirement operator that's listed, and that's 88 00:04:21,960 --> 00:04:25,560 Speaker 2: going to raise another one billion dollars in capital. And 89 00:04:25,560 --> 00:04:27,080 Speaker 2: one of the reasons they said they were doing that 90 00:04:27,240 --> 00:04:29,359 Speaker 2: is that people that were thinking about coming into the 91 00:04:29,360 --> 00:04:31,880 Speaker 2: retirement village hadn't been able to sell their houses at 92 00:04:31,920 --> 00:04:35,000 Speaker 2: the price they liked, so they've deferred coming in. So 93 00:04:35,200 --> 00:04:38,000 Speaker 2: Ryman's got extra stock that's empty. So yeah, I just 94 00:04:38,000 --> 00:04:39,520 Speaker 2: wondered what your perspective on that was. 95 00:04:39,600 --> 00:04:41,200 Speaker 1: Yeah, Well, if you look at the data from real 96 00:04:41,279 --> 00:04:44,119 Speaker 1: estate dot co dot Nz, they have total listings sitting 97 00:04:44,160 --> 00:04:46,719 Speaker 1: around about thirty two to thirty three thousand at the moment, 98 00:04:47,320 --> 00:04:50,440 Speaker 1: that's up about eighteen one eight percent from a year ago. 99 00:04:50,880 --> 00:04:54,120 Speaker 1: Compare that with under fourteen thousand in the middle of 100 00:04:54,160 --> 00:04:56,839 Speaker 1: twenty twenty one, So it's quite a change from back then. 101 00:04:57,320 --> 00:05:00,240 Speaker 1: And I guess what I'm perceiving in the housing market 102 00:05:00,279 --> 00:05:03,279 Speaker 1: now is that there are more people willing to sell. 103 00:05:03,480 --> 00:05:05,960 Speaker 1: That's what happened in twenty twenty three. The first buyers 104 00:05:05,960 --> 00:05:08,880 Speaker 1: went into the market are the first home buyers. Then 105 00:05:09,000 --> 00:05:11,280 Speaker 1: some of the investors moved into the market, and then 106 00:05:11,360 --> 00:05:13,760 Speaker 1: a lot of investors sellers. They stepped into the market, 107 00:05:13,800 --> 00:05:16,400 Speaker 1: and we saw a similar sort of thing last year, 108 00:05:16,800 --> 00:05:18,560 Speaker 1: and so there are a number of people who want 109 00:05:18,600 --> 00:05:20,560 Speaker 1: to sell, get on with their lives, et cetera. But 110 00:05:20,600 --> 00:05:24,080 Speaker 1: it is definitely strongly a buyer's market. In my survey 111 00:05:24,160 --> 00:05:27,040 Speaker 1: of real estate agents, I've got a net forty percent 112 00:05:27,120 --> 00:05:30,839 Speaker 1: of them saying it's a buyer's market still. And when 113 00:05:30,839 --> 00:05:34,400 Speaker 1: it comes to the vendors willing to capitulate too, many 114 00:05:34,440 --> 00:05:37,360 Speaker 1: have memories of where the prices were, you know, two 115 00:05:37,440 --> 00:05:40,360 Speaker 1: three years or so ago, So a lot of them 116 00:05:40,400 --> 00:05:42,560 Speaker 1: still aren't willing to discount, you know, to meet the 117 00:05:42,600 --> 00:05:45,480 Speaker 1: market and get on with their life, whether it be 118 00:05:45,480 --> 00:05:49,120 Speaker 1: retirement or shifting, et cetera. So there could easily still 119 00:05:49,160 --> 00:05:51,159 Speaker 1: be a little bit more downward price adjustment to the 120 00:05:51,200 --> 00:05:53,359 Speaker 1: very near future, but I think it's more going to 121 00:05:53,400 --> 00:05:55,839 Speaker 1: be the buyers coming back into the market later this 122 00:05:56,000 --> 00:05:59,280 Speaker 1: year as the employment situation looks better. But certainly the 123 00:05:59,360 --> 00:06:00,600 Speaker 1: vendors are out there. 124 00:06:01,279 --> 00:06:04,160 Speaker 2: Where does that leave the investors then? I mean, perhaps 125 00:06:04,279 --> 00:06:07,920 Speaker 2: because the prices are depressed, there's some not so much bargains, 126 00:06:07,920 --> 00:06:09,760 Speaker 2: but there's some reasonable pickings. 127 00:06:10,279 --> 00:06:13,400 Speaker 1: Yeah, it's challenging, I think for the investors out there 128 00:06:13,440 --> 00:06:16,080 Speaker 1: because the cost of running a rental business is now 129 00:06:16,160 --> 00:06:20,080 Speaker 1: so much more than before, the maintenance costs, the insurance 130 00:06:20,080 --> 00:06:23,080 Speaker 1: cost in particular, and of course the council rates just 131 00:06:23,200 --> 00:06:26,400 Speaker 1: bang bang bang, everyone around the country being told, well, 132 00:06:26,400 --> 00:06:28,040 Speaker 1: this is what you're getting this year, Like in the 133 00:06:28,080 --> 00:06:29,760 Speaker 1: Hut Valley there, I think lober Hunt it might have 134 00:06:29,800 --> 00:06:32,240 Speaker 1: been fifteen percent they're getting this year, and plans are 135 00:06:32,240 --> 00:06:34,200 Speaker 1: for the same next year, bang bang, you know for 136 00:06:34,240 --> 00:06:36,800 Speaker 1: a few years after that. So that just changes the 137 00:06:36,880 --> 00:06:39,880 Speaker 1: dynamic and the investors have to think, Okay, costs are 138 00:06:39,880 --> 00:06:43,159 Speaker 1: going up, what is my ability to get extra rent 139 00:06:43,160 --> 00:06:46,440 Speaker 1: coming through? Not good? At the moment. I've got about 140 00:06:46,440 --> 00:06:49,640 Speaker 1: a net twenty one percent or so of landlords in 141 00:06:49,760 --> 00:06:52,480 Speaker 1: a survey that I run saying it is very difficult 142 00:06:52,480 --> 00:06:55,040 Speaker 1: to get a good tend the moment a year ago 143 00:06:55,160 --> 00:06:57,600 Speaker 1: in net twenty percent was saying it's easy to get 144 00:06:57,600 --> 00:07:00,560 Speaker 1: a good tenant. So for the investors, I know, I 145 00:07:00,600 --> 00:07:03,599 Speaker 1: see some commentary out there people saying we see the 146 00:07:03,640 --> 00:07:06,520 Speaker 1: investors coming back into the market as buyers. I think 147 00:07:06,560 --> 00:07:10,840 Speaker 1: that flow is relatively small out there. The bigger change 148 00:07:10,960 --> 00:07:14,920 Speaker 1: is the investors as sellers. So again in my survey 149 00:07:14,960 --> 00:07:18,840 Speaker 1: of the property investors, I have about a net fourteen 150 00:07:19,000 --> 00:07:23,360 Speaker 1: percent of the landlord saying they're looking to sell now. 151 00:07:23,400 --> 00:07:26,320 Speaker 1: The last time that measure was positive, as in more 152 00:07:26,320 --> 00:07:29,200 Speaker 1: looking to buy than sell, was about March of twenty 153 00:07:29,240 --> 00:07:32,200 Speaker 1: twenty three, and the proportions saying they want to buy 154 00:07:32,640 --> 00:07:35,560 Speaker 1: gross number it's unchanged about twenty one percent, So twenty 155 00:07:35,600 --> 00:07:37,560 Speaker 1: one percent of the landlord saying yeah, I'd like to buy, 156 00:07:37,640 --> 00:07:39,480 Speaker 1: same now as a year and a half or two 157 00:07:39,560 --> 00:07:42,440 Speaker 1: years ago. What's changed is that back there early twenty 158 00:07:42,480 --> 00:07:45,840 Speaker 1: twenty three, I only had about twenty percent saying I'm 159 00:07:45,840 --> 00:07:49,320 Speaker 1: looking to sell. Now it's thirty five percent. So this 160 00:07:49,400 --> 00:07:52,160 Speaker 1: is the change in the investor market in the past 161 00:07:52,160 --> 00:07:55,120 Speaker 1: sor twelve to eighteen months. More in the of the 162 00:07:55,120 --> 00:07:58,280 Speaker 1: investors are looking to sell. The numbers don't quite add 163 00:07:58,360 --> 00:08:01,280 Speaker 1: up for them, and they're not expect acting rapid capital 164 00:08:01,320 --> 00:08:03,960 Speaker 1: gain in the near future. So that to me is 165 00:08:04,000 --> 00:08:06,440 Speaker 1: the main change out there, not necessarily any great change 166 00:08:06,440 --> 00:08:09,720 Speaker 1: in investors buying. There's more investors looking to sell and 167 00:08:09,760 --> 00:08:11,240 Speaker 1: maybe put the money somewhere. 168 00:08:10,920 --> 00:08:15,000 Speaker 2: Else Tony, when you say investor money is probably going elsewhere, 169 00:08:15,040 --> 00:08:17,240 Speaker 2: do we have any inkling on where that might be, 170 00:08:17,400 --> 00:08:20,400 Speaker 2: is it listed property trust? Is it even commercial property, 171 00:08:20,440 --> 00:08:22,760 Speaker 2: which I think has come back a little well. 172 00:08:22,760 --> 00:08:25,280 Speaker 1: Certainly people have had a strong interest in commercial property 173 00:08:25,280 --> 00:08:27,640 Speaker 1: for the past three to four years. With the residential 174 00:08:27,680 --> 00:08:31,440 Speaker 1: market moving backwards, investors, when we're looking for something different, 175 00:08:31,440 --> 00:08:34,720 Speaker 1: I'm having to learn about earthquake ratings, et cetera. Out there, 176 00:08:35,040 --> 00:08:37,880 Speaker 1: there has actually been relatively good demand from tenants for 177 00:08:37,920 --> 00:08:41,840 Speaker 1: commercial property, or more essentially in terms of upgrading. A 178 00:08:41,880 --> 00:08:44,400 Speaker 1: lot of businesses. They need to boost their productivity, they 179 00:08:44,440 --> 00:08:46,760 Speaker 1: need to look for cost savings, et cetera. So there's 180 00:08:46,800 --> 00:08:50,040 Speaker 1: a lot of restructuring happening in the say the logistics side. 181 00:08:50,320 --> 00:08:52,720 Speaker 1: The warehouse over there doesn't work any longer. You need 182 00:08:52,760 --> 00:08:55,120 Speaker 1: a bigger one over there, meaning you can close two 183 00:08:55,200 --> 00:08:58,160 Speaker 1: or the other warehouses. You want something maybe near one 184 00:08:58,160 --> 00:09:01,240 Speaker 1: of the motorways, etc. There seems to be a lot 185 00:09:01,280 --> 00:09:04,280 Speaker 1: of construction of new commercial buildings in that regard. The 186 00:09:04,360 --> 00:09:07,760 Speaker 1: demand for office space has sort of shifted towards strong 187 00:09:07,800 --> 00:09:10,360 Speaker 1: support for the prime stuff out there, not so much 188 00:09:10,360 --> 00:09:13,760 Speaker 1: for the lower grades as yet. But yeah, that there's 189 00:09:13,760 --> 00:09:16,080 Speaker 1: actually been strong interest for the commercial property I think 190 00:09:16,080 --> 00:09:18,640 Speaker 1: for some time. I guess the relevant thing there is 191 00:09:18,679 --> 00:09:21,840 Speaker 1: that when interstrates go down, the interest in commercial property 192 00:09:22,160 --> 00:09:25,840 Speaker 1: goes up. My view is that interstrate's going down that 193 00:09:25,920 --> 00:09:29,560 Speaker 1: are relevant to the commercial property investors three five ten 194 00:09:29,640 --> 00:09:32,439 Speaker 1: year interst rates. We're probably just about near the end 195 00:09:32,520 --> 00:09:36,720 Speaker 1: of those interrastrate falls, So I don't necessarily think commercial 196 00:09:36,720 --> 00:09:39,800 Speaker 1: property demand is going to rise all that much over 197 00:09:39,840 --> 00:09:42,320 Speaker 1: and above what you'd naturally expect with the economy starting 198 00:09:42,360 --> 00:09:43,560 Speaker 1: to improve this year. 199 00:09:44,160 --> 00:09:46,920 Speaker 2: If we look around the country, it does appear to 200 00:09:46,960 --> 00:09:48,720 Speaker 2: be a bit of a mixed picture. If we think 201 00:09:48,760 --> 00:09:53,000 Speaker 2: back to the residential property market, I think in your 202 00:09:53,040 --> 00:09:56,040 Speaker 2: surveys of real estate agents that look like Northland was 203 00:09:56,080 --> 00:09:59,959 Speaker 2: still a bit subdued. Auckland has a ton of listings. 204 00:10:01,080 --> 00:10:03,679 Speaker 2: I think they have plenty was coming back but strongly. 205 00:10:03,960 --> 00:10:08,280 Speaker 2: Harks Bay similar, Wellington still in the dulgrums. South Island 206 00:10:08,520 --> 00:10:11,560 Speaker 2: a bit of a bright spot. What's your view on 207 00:10:12,080 --> 00:10:13,480 Speaker 2: that picture? Yeah? 208 00:10:13,600 --> 00:10:17,760 Speaker 1: Yeah, Regionally it is reasonably diverse. Christ Church, I think 209 00:10:17,760 --> 00:10:20,840 Speaker 1: there's good economic support in terms of the tourist numbers. 210 00:10:20,840 --> 00:10:24,880 Speaker 1: There's still recovery to happen there. Rejuvenation of the CBD 211 00:10:25,000 --> 00:10:27,840 Speaker 1: will rebuilding of it, et cetera. The affordability of housing 212 00:10:27,880 --> 00:10:31,000 Speaker 1: is a big positive as well. So I've long had 213 00:10:31,000 --> 00:10:34,400 Speaker 1: a positive view on christ Church slash Canterbury, and when 214 00:10:34,400 --> 00:10:36,400 Speaker 1: I say Canterbury, South Canterbury of course with a dairy 215 00:10:36,400 --> 00:10:38,400 Speaker 1: payout being pretty strong, so that's going to be positive 216 00:10:38,440 --> 00:10:41,480 Speaker 1: for Irashburton's tim marous et cetera. Or setting some of 217 00:10:41,520 --> 00:10:44,440 Speaker 1: the freezing works are lost down in tomorrow. For instance, 218 00:10:45,080 --> 00:10:47,800 Speaker 1: in Auckland Yere there's an oversupplied town houses and that's 219 00:10:47,840 --> 00:10:50,600 Speaker 1: sort of dominating the market in people's thinking at the moment, 220 00:10:50,679 --> 00:10:54,319 Speaker 1: especially out the west Auckland direction on northwest, and it's 221 00:10:54,360 --> 00:10:56,440 Speaker 1: going to take a while for that to run through, 222 00:10:56,520 --> 00:10:59,560 Speaker 1: and part of that running through is then there will 223 00:10:59,559 --> 00:11:03,880 Speaker 1: be a further decrease in townhouse construction and it'll set 224 00:11:03,920 --> 00:11:06,640 Speaker 1: the scene for maybe it's eighteen months from now, people 225 00:11:06,679 --> 00:11:09,760 Speaker 1: will look around and go not too many spare townhouses, 226 00:11:10,000 --> 00:11:12,160 Speaker 1: Maybe we need to build some more, and then there'll 227 00:11:12,160 --> 00:11:14,760 Speaker 1: be a lag and building some more over twenty twenty six, 228 00:11:14,800 --> 00:11:16,960 Speaker 1: So that cycle is going to be interesting for Auckland. 229 00:11:17,200 --> 00:11:19,360 Speaker 1: A wee bit further out, christ Church maybe has a 230 00:11:19,360 --> 00:11:22,600 Speaker 1: little bit of oversupply of some townhouses in the CBD, 231 00:11:22,800 --> 00:11:27,080 Speaker 1: just a little bit there Wellington. People have to be careful. 232 00:11:27,120 --> 00:11:30,840 Speaker 1: There's Wellington City and then lower Heart, Upper Hut Capity 233 00:11:30,880 --> 00:11:34,520 Speaker 1: Coast and back towards Poiriuha. For Wellington City, there are 234 00:11:34,640 --> 00:11:38,800 Speaker 1: challenges under Labors government. We saw the number of public 235 00:11:38,800 --> 00:11:41,640 Speaker 1: servants go up about eighteen one eight thousand, and obviously 236 00:11:41,920 --> 00:11:43,840 Speaker 1: a lot of them are losing their jobs. Now there's 237 00:11:43,840 --> 00:11:46,720 Speaker 1: clearly going to be more restructuring, slash redundancies in the 238 00:11:46,720 --> 00:11:49,440 Speaker 1: public service. The government has to address it. Seventeen billion 239 00:11:49,480 --> 00:11:52,199 Speaker 1: dollar deficit. There's extra money going to have to clearly 240 00:11:52,240 --> 00:11:55,640 Speaker 1: be able allocated for defense as well, and so that 241 00:11:55,760 --> 00:11:58,000 Speaker 1: is going to keep Wellington depressed for I think you 242 00:11:58,200 --> 00:12:01,160 Speaker 1: quite all of this year quite frankly, maybe into bit 243 00:12:01,160 --> 00:12:03,959 Speaker 1: of twenty twenty six for the city, but not necessarily 244 00:12:03,960 --> 00:12:05,920 Speaker 1: the same for the Hut Valley and up Capiti Coast. 245 00:12:06,000 --> 00:12:08,440 Speaker 1: There's just so much development going to be happening up there, 246 00:12:08,720 --> 00:12:12,559 Speaker 1: Transmission Gully Motorway in place, and of course the expressway 247 00:12:12,679 --> 00:12:16,440 Speaker 1: getting extended to north of Livin as well. So have 248 00:12:16,480 --> 00:12:19,360 Speaker 1: a positive view there. Why Kato Taranaki, they're going to 249 00:12:19,360 --> 00:12:23,400 Speaker 1: benefit again from the dairy payout being relatively good. Not 250 00:12:23,480 --> 00:12:26,200 Speaker 1: that I have any particularly divergent view on New Plymouth. 251 00:12:26,720 --> 00:12:28,800 Speaker 1: It's just a good always a good solid underpinning there. 252 00:12:28,880 --> 00:12:32,200 Speaker 1: Quite frankly, yeah, Toweronger may have to wait till there's 253 00:12:32,200 --> 00:12:35,480 Speaker 1: a bit more strength in Auckland and then the user 254 00:12:35,520 --> 00:12:38,280 Speaker 1: will sell your house in Auckland, get a good price, 255 00:12:38,920 --> 00:12:43,080 Speaker 1: retire across to Toweronger. That engine will start a chugging 256 00:12:43,120 --> 00:12:45,640 Speaker 1: away again. But it's not really doing it at the moment. 257 00:12:47,240 --> 00:12:50,000 Speaker 2: Let's think about mortgage holders. I mean, I think at 258 00:12:50,080 --> 00:12:53,840 Speaker 2: least half have fixed at quite short terms. So we're 259 00:12:53,840 --> 00:12:58,160 Speaker 2: talking six months in one year. With rates nearly bottoming, 260 00:12:58,400 --> 00:13:00,920 Speaker 2: people are probably thinking what do do and do you 261 00:13:00,920 --> 00:13:03,960 Speaker 2: think we're going to see a change to those longer 262 00:13:04,040 --> 00:13:06,520 Speaker 2: term rates. That said, this week there seems to be 263 00:13:06,520 --> 00:13:09,560 Speaker 2: a bit of a war between ASP and Westpac that 264 00:13:09,679 --> 00:13:13,320 Speaker 2: two year rate at four point ninety nine. What's your thoughts? 265 00:13:13,440 --> 00:13:15,560 Speaker 1: Well, when west Pac for two weeks had three years 266 00:13:15,600 --> 00:13:17,560 Speaker 1: at four point nine to nine, I jumped up and 267 00:13:17,559 --> 00:13:20,160 Speaker 1: down and said now that is what I would take basically, 268 00:13:20,920 --> 00:13:23,000 Speaker 1: and it didn't. The other banks didn't jump in. It 269 00:13:23,000 --> 00:13:24,920 Speaker 1: didn't last, and so yeah, I see the competition is 270 00:13:24,920 --> 00:13:27,560 Speaker 1: for the two year period. If I had a mortgage 271 00:13:28,040 --> 00:13:30,160 Speaker 1: at the moment, and I was thinking I'll get a 272 00:13:30,200 --> 00:13:32,120 Speaker 1: lot of it repaid in the next two years. I 273 00:13:32,160 --> 00:13:34,880 Speaker 1: personally would probably take the two years at four point 274 00:13:35,000 --> 00:13:38,880 Speaker 1: nine to nine percent. I see no great benefit any longer. Personally, 275 00:13:38,880 --> 00:13:43,080 Speaker 1: it's sticking floating six months, twelve months. Those rates will 276 00:13:43,080 --> 00:13:45,439 Speaker 1: come down a bit further. Do I think people need 277 00:13:45,480 --> 00:13:47,920 Speaker 1: to hurry. I don't see the upward leg of the 278 00:13:47,960 --> 00:13:52,080 Speaker 1: monetary policy cycles starting again until maybe late twenty six, 279 00:13:52,120 --> 00:13:55,200 Speaker 1: maybe twenty twenty seven. But that's the next shift in 280 00:13:55,240 --> 00:13:57,600 Speaker 1: the market. In terms of thinking about interest rates, it's 281 00:13:57,600 --> 00:13:59,280 Speaker 1: all been monetary policy is easing. 282 00:13:59,280 --> 00:13:59,800 Speaker 2: It's easing. 283 00:14:00,360 --> 00:14:02,640 Speaker 1: Eventually it stops seizing. Oh, that's going to be later 284 00:14:02,679 --> 00:14:04,000 Speaker 1: on this year, second half of this year. 285 00:14:04,080 --> 00:14:04,400 Speaker 2: Okay. 286 00:14:04,880 --> 00:14:07,000 Speaker 1: I wonder when it goes up back up again. The 287 00:14:07,040 --> 00:14:09,760 Speaker 1: market's not really there yet. When that happens, you'll probably 288 00:14:09,760 --> 00:14:11,480 Speaker 1: start to see them upward movement in the three to 289 00:14:11,520 --> 00:14:14,760 Speaker 1: five year wholesale borrowing costs for the banks and those 290 00:14:14,800 --> 00:14:18,040 Speaker 1: interrast rates rising. That might be a story for next year. 291 00:14:18,880 --> 00:14:21,480 Speaker 1: Most people, being kiwis, are only going to fix for 292 00:14:21,520 --> 00:14:23,560 Speaker 1: two years, three years. A few will jump in the 293 00:14:23,960 --> 00:14:25,600 Speaker 1: even when the five year rate was at two point 294 00:14:25,680 --> 00:14:28,200 Speaker 1: nine nine percent. Hardly anybody fix back then from twenty 295 00:14:28,280 --> 00:14:30,680 Speaker 1: twenty to twenty twenty one. But most people are probably 296 00:14:30,720 --> 00:14:32,480 Speaker 1: going to be reasonably happy in the two year period. 297 00:14:32,680 --> 00:14:35,640 Speaker 1: And what's going to happen Take ourselves two years from now, 298 00:14:36,040 --> 00:14:38,640 Speaker 1: so that's twenty twenty seven. Interest rates might be going 299 00:14:38,760 --> 00:14:41,640 Speaker 1: up by then. So that's the difficulty. You fix two 300 00:14:41,720 --> 00:14:44,239 Speaker 1: years at the moment because it seems to be pretty attractive. 301 00:14:44,960 --> 00:14:48,280 Speaker 1: Your rate's going to mature right when there's upside risk 302 00:14:48,600 --> 00:14:50,560 Speaker 1: on the interest rates coming forward, and then you're going 303 00:14:50,600 --> 00:14:52,240 Speaker 1: to have a bit of a problem. So that's one 304 00:14:52,240 --> 00:14:54,960 Speaker 1: reason I was such in favor of three years four 305 00:14:55,080 --> 00:14:58,000 Speaker 1: ninety nine. Maybe it comes back again and again I'd 306 00:14:58,000 --> 00:15:00,160 Speaker 1: probably say that's what I would personally go for. 307 00:15:00,800 --> 00:15:05,360 Speaker 2: So a conundrum for people fixing longer or shorter. Yep, 308 00:15:05,680 --> 00:15:07,280 Speaker 2: it's almost like timing the market. 309 00:15:08,640 --> 00:15:11,920 Speaker 1: Sometimes something sticks out and you say, well, I don't 310 00:15:11,920 --> 00:15:13,320 Speaker 1: really have a view on where rates are going to 311 00:15:13,320 --> 00:15:15,840 Speaker 1: go in the near future, but this one seems screen's 312 00:15:15,880 --> 00:15:17,720 Speaker 1: quite good. And that was the two ninety nine to 313 00:15:17,720 --> 00:15:20,160 Speaker 1: five year one from twenty twenty twenty one, and I think, 314 00:15:20,200 --> 00:15:22,800 Speaker 1: like I say, close to five percent were just under 315 00:15:22,840 --> 00:15:25,400 Speaker 1: for three years I mean, if there was a four 316 00:15:25,480 --> 00:15:28,120 Speaker 1: or five year rate, I'd probably take that at four 317 00:15:28,120 --> 00:15:29,760 Speaker 1: point nine nine percent. If one of the banks was 318 00:15:29,800 --> 00:15:32,640 Speaker 1: going to offer that, they probably won't because the competition 319 00:15:33,280 --> 00:15:35,200 Speaker 1: where people are looking is more in the two year 320 00:15:35,240 --> 00:15:35,680 Speaker 1: time frame. 321 00:15:35,760 --> 00:15:38,400 Speaker 2: Quite frank, Yeah, and that's hence why I think ASP 322 00:15:38,520 --> 00:15:40,800 Speaker 2: and Wespeck have done what they had And also that 323 00:15:40,800 --> 00:15:42,840 Speaker 2: seems to be one of the few moves. Most of 324 00:15:42,880 --> 00:15:47,280 Speaker 2: the rate moves since the OCR last week is floating. 325 00:15:48,000 --> 00:15:50,920 Speaker 1: Yeah, well, floating is really closely tied to the cash rate. 326 00:15:51,040 --> 00:15:54,080 Speaker 1: It goes up, goes up, it goes down. The float 327 00:15:54,080 --> 00:15:56,320 Speaker 1: at the more rate will come down. The one year 328 00:15:56,400 --> 00:15:58,920 Speaker 1: fixed rates will also tend to move, but once you 329 00:15:58,960 --> 00:16:02,200 Speaker 1: get out further along the year curve, this reflects expectations 330 00:16:02,240 --> 00:16:04,240 Speaker 1: of where the market is going to go. And the 331 00:16:04,280 --> 00:16:06,880 Speaker 1: reason we haven't seen like fresh cuts in three, four 332 00:16:06,920 --> 00:16:09,280 Speaker 1: or five year mortgage rates is because the markets had 333 00:16:09,320 --> 00:16:12,280 Speaker 1: already factored in that the low point for the cash 334 00:16:12,360 --> 00:16:14,720 Speaker 1: rate isn't going to be twenty twenty six or twenty seven, 335 00:16:14,880 --> 00:16:16,360 Speaker 1: it's going to be the end of this year. So 336 00:16:16,400 --> 00:16:19,960 Speaker 1: the Reserve Bank merely validated what the market had already moved. 337 00:16:19,960 --> 00:16:22,160 Speaker 1: Towards and that's why most of us are now thinking 338 00:16:22,400 --> 00:16:24,680 Speaker 1: we are probably at the low point in the cycle 339 00:16:24,760 --> 00:16:27,520 Speaker 1: for three, four or five year fixed rates, bank borrowing costs, 340 00:16:27,680 --> 00:16:30,160 Speaker 1: and the mortgage rates. Two years there could be a 341 00:16:30,200 --> 00:16:32,280 Speaker 1: little bit more downside, but I really think it's going 342 00:16:32,320 --> 00:16:34,200 Speaker 1: to be pretty limited from here. 343 00:16:34,240 --> 00:16:37,160 Speaker 2: With those longer term rates too. Isn't that what the 344 00:16:37,320 --> 00:16:41,600 Speaker 2: geopolitical kind of world economy and the effects that it has. 345 00:16:42,040 --> 00:16:44,920 Speaker 2: Isn't that more something that affects those rates and those 346 00:16:44,920 --> 00:16:45,600 Speaker 2: shorter term right? 347 00:16:45,760 --> 00:16:48,120 Speaker 1: Yeah, most definitely. If there's a big shock out there, 348 00:16:48,120 --> 00:16:50,400 Speaker 1: then the Reserve Bank will respond one way or another. 349 00:16:50,520 --> 00:16:52,960 Speaker 1: Are to that, And of course they expressed a lot 350 00:16:53,000 --> 00:16:55,480 Speaker 1: of uncertainty in their monetary policy statement about what's going 351 00:16:55,520 --> 00:16:58,200 Speaker 1: to happen in the world economy, because well, duh, none 352 00:16:58,200 --> 00:17:00,640 Speaker 1: of us know exactly what is going to happen. You 353 00:17:00,680 --> 00:17:04,119 Speaker 1: think to yourself, Okay, if tariffs go up, there's more inflation. Oh, 354 00:17:04,240 --> 00:17:07,400 Speaker 1: interstrates will be higher. But if tariffs go up, maybe 355 00:17:07,400 --> 00:17:10,680 Speaker 1: that depresses world growth. Oh that means less inflation, That 356 00:17:10,720 --> 00:17:13,480 Speaker 1: means interstrates go down. You just got to take it 357 00:17:13,520 --> 00:17:15,760 Speaker 1: as it comes, quite frankly, See what's going to develop 358 00:17:15,800 --> 00:17:17,600 Speaker 1: out of all of this. So there is a lot 359 00:17:17,600 --> 00:17:21,880 Speaker 1: of uncertainty for the whole interrastrate structure still out there. 360 00:17:22,000 --> 00:17:24,080 Speaker 1: If we're looking ahead it where interstrates are likely to 361 00:17:24,119 --> 00:17:26,199 Speaker 1: go in the very near future. I certainly think it's 362 00:17:26,240 --> 00:17:29,080 Speaker 1: reasonable to expect that come the next review April. I 363 00:17:29,080 --> 00:17:32,000 Speaker 1: think it's early April, they will cut by I think 364 00:17:32,040 --> 00:17:35,320 Speaker 1: not half but quarter of a percent, and then there's 365 00:17:35,359 --> 00:17:38,360 Speaker 1: probably one more after that, So whatever that is six 366 00:17:38,640 --> 00:17:41,840 Speaker 1: or eight weeks after early April. I guess where I 367 00:17:41,920 --> 00:17:44,520 Speaker 1: differ from many others is that I don't think they'll 368 00:17:44,520 --> 00:17:46,680 Speaker 1: take it down to three percent. I think they'll get 369 00:17:46,720 --> 00:17:49,520 Speaker 1: to the three point twenty five percent and pretty much 370 00:17:49,560 --> 00:17:52,439 Speaker 1: say that's probably going to be it. But again, the 371 00:17:52,520 --> 00:17:55,320 Speaker 1: uncertainty out there in the world we're living in a 372 00:17:55,359 --> 00:17:59,840 Speaker 1: Trumpian politics, economics, international environment. We've just got to hang 373 00:17:59,920 --> 00:18:02,000 Speaker 1: on for the ride. Quite frankly, let's. 374 00:18:01,920 --> 00:18:05,120 Speaker 2: Jump back to construction and consense. That's usually a bit 375 00:18:05,119 --> 00:18:07,119 Speaker 2: of a litmus test as to how things are going. 376 00:18:07,680 --> 00:18:11,280 Speaker 2: I do note that renovations seem to be back in vogue. 377 00:18:11,680 --> 00:18:12,960 Speaker 2: Can you tell us a bit about that. 378 00:18:13,200 --> 00:18:16,640 Speaker 1: Yeah, that's interesting that in my Monthly Spending Plans survey 379 00:18:18,240 --> 00:18:20,000 Speaker 1: one of the I think there's only two areas which 380 00:18:20,040 --> 00:18:22,480 Speaker 1: have shown much of a change recently. One is a 381 00:18:22,520 --> 00:18:24,480 Speaker 1: few more people are thinking about buying a house to 382 00:18:24,560 --> 00:18:26,879 Speaker 1: live in themselves. I think that's the first home buyers 383 00:18:27,160 --> 00:18:30,040 Speaker 1: still looking to take advantage of the opportunity out there 384 00:18:30,040 --> 00:18:33,359 Speaker 1: with not much competition from investors. And the other one 385 00:18:33,520 --> 00:18:35,920 Speaker 1: is that things are still relatively depressed and terms of 386 00:18:35,920 --> 00:18:38,879 Speaker 1: people saying I'm going to buy a motor vehicle or appliance. 387 00:18:39,119 --> 00:18:41,440 Speaker 1: But for the home renovations, there's definitely a strong upward 388 00:18:41,480 --> 00:18:43,800 Speaker 1: trend which has gone through there, and maybe for some 389 00:18:43,960 --> 00:18:47,000 Speaker 1: people it's a feeling of there's a few more tradees 390 00:18:47,040 --> 00:18:49,880 Speaker 1: out there now because house building is falling away. There's 391 00:18:49,920 --> 00:18:53,040 Speaker 1: a few more people offering their services electrical plumbing and 392 00:18:53,119 --> 00:18:55,800 Speaker 1: a carpentry, et cetera. So there's an opportunity maybe to 393 00:18:55,840 --> 00:18:58,240 Speaker 1: get some of that work done without having to pay 394 00:18:58,240 --> 00:19:01,240 Speaker 1: an absolute arm and a leg in order to get 395 00:19:01,240 --> 00:19:03,399 Speaker 1: it completed and run the job. The risk of the 396 00:19:03,480 --> 00:19:04,960 Speaker 1: job's not going to be done, you know, for quite 397 00:19:04,960 --> 00:19:06,520 Speaker 1: some time if they shoult off to something that's going 398 00:19:06,560 --> 00:19:09,440 Speaker 1: to pay better in the near term. So I think 399 00:19:09,440 --> 00:19:12,440 Speaker 1: it's that it's also the case, I think that there's 400 00:19:12,440 --> 00:19:15,520 Speaker 1: always the older generation out there looking to improve things, 401 00:19:15,520 --> 00:19:18,800 Speaker 1: heading into retirement or fresh into it, and it looks 402 00:19:18,800 --> 00:19:20,600 Speaker 1: like some of them are deciding, look, I've waited long 403 00:19:20,680 --> 00:19:24,119 Speaker 1: enough unless just finally get this place looking okay. But 404 00:19:24,320 --> 00:19:25,879 Speaker 1: it is a bit of a surprising thing there. It 405 00:19:25,960 --> 00:19:27,720 Speaker 1: is an area of spending growth. 406 00:19:28,280 --> 00:19:33,520 Speaker 2: Bathrooms and kitchens predominantly rather than great, big new housing. 407 00:19:33,720 --> 00:19:35,920 Speaker 1: Does sound like, yeah, yeah, I think so. Yeahs a 408 00:19:35,920 --> 00:19:38,000 Speaker 1: bit of an upgrading of the existing stock or the 409 00:19:38,000 --> 00:19:43,000 Speaker 1: places that people already own out there. I don't think 410 00:19:43,080 --> 00:19:47,640 Speaker 1: my survey there is capturing people saying renovations. Oh, that's 411 00:19:47,680 --> 00:19:50,080 Speaker 1: the granny flat I'm putting out the back. I don't 412 00:19:50,080 --> 00:19:52,879 Speaker 1: think they're including that particular item in there, Tony. 413 00:19:53,040 --> 00:19:56,280 Speaker 2: Just with construction. Let's unpack that little more. What are 414 00:19:56,320 --> 00:19:57,600 Speaker 2: the dynamics there. 415 00:19:58,200 --> 00:20:01,760 Speaker 1: Yeah, the dynamic would be that when you get residential 416 00:20:01,840 --> 00:20:05,720 Speaker 1: real estate turnover of existing you know, used houses picking up, 417 00:20:05,920 --> 00:20:08,960 Speaker 1: it eventually leads to the number of consents being issued 418 00:20:08,960 --> 00:20:11,440 Speaker 1: for new houses to be built picking up. And we've 419 00:20:11,480 --> 00:20:13,560 Speaker 1: seen a bit of an increase in real estate turnover. 420 00:20:14,200 --> 00:20:17,280 Speaker 1: That's about seventy two thousand in the past year. A 421 00:20:17,359 --> 00:20:18,920 Speaker 1: year a year and a half ago it was fifty 422 00:20:18,920 --> 00:20:21,080 Speaker 1: eight thousand. So yes, he's an upward trend, but it's 423 00:20:21,119 --> 00:20:25,240 Speaker 1: relatively mild. And given the oversupply of townhouses which sits 424 00:20:25,680 --> 00:20:28,320 Speaker 1: out there and developers. You see developers that put some 425 00:20:28,359 --> 00:20:31,479 Speaker 1: of these properties into the rental pool, and once they 426 00:20:31,520 --> 00:20:33,639 Speaker 1: see the housing market moving, they're going to offer them 427 00:20:33,680 --> 00:20:35,880 Speaker 1: up for sale. It's going to keep things constrained into 428 00:20:36,000 --> 00:20:37,840 Speaker 1: sort of twenty twenty six, the year. I think the 429 00:20:37,840 --> 00:20:42,080 Speaker 1: townhouse construction keeps going down into twenty twenty six and 430 00:20:42,160 --> 00:20:44,840 Speaker 1: the finance requirement, you know, pre sales, that sort of thing. 431 00:20:45,080 --> 00:20:49,080 Speaker 1: Whereas for individual standalone houses, i'd see that rising before 432 00:20:49,160 --> 00:20:52,360 Speaker 1: the end of this year. Sort of just a combination 433 00:20:52,840 --> 00:20:56,560 Speaker 1: of not so much of an oversupply in that market 434 00:20:57,480 --> 00:21:00,400 Speaker 1: and yeah, just the effect of the interest rates off 435 00:21:00,400 --> 00:21:03,399 Speaker 1: coming through and the labor market perception starting to improve 436 00:21:03,920 --> 00:21:06,159 Speaker 1: as well. But it's going to be a different dynamic 437 00:21:06,240 --> 00:21:08,560 Speaker 1: townhouses versus standalone. 438 00:21:08,280 --> 00:21:10,760 Speaker 2: And is there any areas in particular where you think 439 00:21:10,800 --> 00:21:12,880 Speaker 2: construction will be more buoyant. 440 00:21:13,240 --> 00:21:15,600 Speaker 1: I suppose Again on christ Church, I've got a positive 441 00:21:15,640 --> 00:21:18,120 Speaker 1: view there. The population movement that is happening down there. 442 00:21:18,160 --> 00:21:21,040 Speaker 1: For affordability reasons. All the growth we see down at 443 00:21:21,080 --> 00:21:23,879 Speaker 1: Rollston obviously in particular, but also north of the city 444 00:21:23,880 --> 00:21:28,480 Speaker 1: with the Northern Corridor opening up there, so that's definitely positive. 445 00:21:29,119 --> 00:21:32,119 Speaker 1: Outside of that, again, up the Capity Coast with the 446 00:21:32,160 --> 00:21:35,800 Speaker 1: expressway network is very positive also, an aging population looking 447 00:21:35,800 --> 00:21:38,560 Speaker 1: to retire up there if they can find the land there. 448 00:21:38,600 --> 00:21:40,160 Speaker 1: There is actually a bit of a shortage of land 449 00:21:40,359 --> 00:21:44,119 Speaker 1: in some areas up there. For Auckland, there's going to 450 00:21:44,160 --> 00:21:47,440 Speaker 1: be expansion up the Northwest area for the next few decades, 451 00:21:47,520 --> 00:21:50,280 Speaker 1: quite frankly, but that's where the over supply of the 452 00:21:50,280 --> 00:21:53,120 Speaker 1: townhouses is and where some of these negative stories are 453 00:21:53,160 --> 00:21:55,960 Speaker 1: around it. They get so roasting hot you're having to 454 00:21:56,040 --> 00:21:58,840 Speaker 1: run your AC to cool the place down. So you know, 455 00:21:59,040 --> 00:22:00,720 Speaker 1: us key with is when we when we have a 456 00:22:00,800 --> 00:22:04,639 Speaker 1: house building boom of some regard, it's like something always 457 00:22:04,640 --> 00:22:09,440 Speaker 1: seems to go wrong. It's either leaking or in this case, 458 00:22:09,840 --> 00:22:12,320 Speaker 1: ye're just getting too hot in the upstairs room too 459 00:22:12,320 --> 00:22:13,040 Speaker 1: many windows. 460 00:22:13,119 --> 00:22:18,520 Speaker 2: Quite frankly, let's look at inflation. That's always a big bogie, 461 00:22:18,560 --> 00:22:21,879 Speaker 2: and it does feel from what the Reserve Bank has 462 00:22:21,880 --> 00:22:24,040 Speaker 2: said that things are in check two point two percent, 463 00:22:24,080 --> 00:22:26,919 Speaker 2: and that's kind of their main mandate. You've talked a 464 00:22:26,920 --> 00:22:30,479 Speaker 2: lot about cyclical inflation, which, as I understand it is 465 00:22:31,560 --> 00:22:34,880 Speaker 2: almost a natural phenomenon when there's a recovery, when there's 466 00:22:34,920 --> 00:22:37,360 Speaker 2: an upturn, you're probably going to get a bit of inflation. 467 00:22:37,800 --> 00:22:41,159 Speaker 2: You've always worn that that's probably around the corner and 468 00:22:41,200 --> 00:22:43,719 Speaker 2: not as far as way as we think. Have you 469 00:22:43,840 --> 00:22:44,800 Speaker 2: changed your mind on that? 470 00:22:45,000 --> 00:22:47,119 Speaker 1: Yeah, No, No, I still definitely got that view. I 471 00:22:47,119 --> 00:22:49,280 Speaker 1: think some of the upside risk is greater because of 472 00:22:49,520 --> 00:22:52,399 Speaker 1: the risk of tariffs going up, for instance. So now 473 00:22:52,400 --> 00:22:55,000 Speaker 1: I'm still of the view. And what I look at there, 474 00:22:55,000 --> 00:22:56,399 Speaker 1: there's a number of things. One of them is the 475 00:22:56,440 --> 00:23:01,280 Speaker 1: A and Z's Monthly Business Outlook Survey. On average since 476 00:23:01,359 --> 00:23:04,280 Speaker 1: nineteen ninety two, inflation has average two point three percent 477 00:23:04,359 --> 00:23:07,080 Speaker 1: since then, on average, and net twenty six percent of 478 00:23:07,119 --> 00:23:09,639 Speaker 1: businesses have said, yeah, in the next twelve months, I'm 479 00:23:09,680 --> 00:23:12,760 Speaker 1: going to increase my prices. That was eighty two percent 480 00:23:12,920 --> 00:23:14,560 Speaker 1: net two and a half or so years ago, so 481 00:23:14,600 --> 00:23:17,640 Speaker 1: that was horrible inflation seven percent or so. That got 482 00:23:17,680 --> 00:23:19,639 Speaker 1: down to thirty net thirty five percent the middle of 483 00:23:19,760 --> 00:23:21,920 Speaker 1: last year. It's now gone up to a net forty 484 00:23:21,920 --> 00:23:24,080 Speaker 1: six percent of businesses saying I'm going to increase my 485 00:23:24,119 --> 00:23:27,280 Speaker 1: prices in the next twelve months, not now, but when 486 00:23:27,359 --> 00:23:30,880 Speaker 1: the opportunity presents itself. So that says to me, when 487 00:23:31,000 --> 00:23:35,200 Speaker 1: the customer flows are stronger, because businesses have got compressed 488 00:23:35,240 --> 00:23:37,600 Speaker 1: margins at the moment, and because many of their costs 489 00:23:37,640 --> 00:23:40,800 Speaker 1: are still going up. When the opportunity presents itself and 490 00:23:40,800 --> 00:23:43,240 Speaker 1: they think I can get a price increase away and 491 00:23:43,280 --> 00:23:45,720 Speaker 1: people are still going to keep buying my product, they're 492 00:23:45,720 --> 00:23:48,400 Speaker 1: going to do it. And I guess maybe I see 493 00:23:48,400 --> 00:23:50,639 Speaker 1: some of that from later this year and especially in 494 00:23:50,680 --> 00:23:53,600 Speaker 1: twenty twenty six, not at the moment unless you're a 495 00:23:53,640 --> 00:23:58,200 Speaker 1: council or electricity company or you know, oligopoly generally or 496 00:23:58,240 --> 00:24:01,000 Speaker 1: monopoly in the case of a council. But that's my 497 00:24:01,119 --> 00:24:03,120 Speaker 1: perception of the risk further out now. The Reserve Bank 498 00:24:03,200 --> 00:24:05,439 Speaker 1: is not focused on that for the moment. That's something 499 00:24:05,480 --> 00:24:08,280 Speaker 1: I think that they'll be looking at later this year. 500 00:24:08,400 --> 00:24:10,000 Speaker 1: In America, there's a little bit of a look at 501 00:24:10,040 --> 00:24:13,720 Speaker 1: it for their economy, but yeah, it's a focus ICEE 502 00:24:13,720 --> 00:24:16,520 Speaker 1: coming a bit further out, and look, if it looks worrying, 503 00:24:16,880 --> 00:24:19,080 Speaker 1: you'll get the longer term interest rates and the medium 504 00:24:19,160 --> 00:24:21,400 Speaker 1: term rates going up before the end of this year. 505 00:24:21,640 --> 00:24:23,160 Speaker 1: We'll just have to see how that pans out. 506 00:24:24,080 --> 00:24:27,200 Speaker 2: So mor gaduate relief at the moment, but it could 507 00:24:27,200 --> 00:24:28,760 Speaker 2: be that we're going to be paying more. 508 00:24:28,640 --> 00:24:31,000 Speaker 1: For goods and services eventually. I mean the Yeah, the 509 00:24:31,000 --> 00:24:33,359 Speaker 1: inflation rate is going to go up. And this is 510 00:24:33,400 --> 00:24:35,880 Speaker 1: one I guess a big problem for the investors, of course, 511 00:24:35,920 --> 00:24:38,760 Speaker 1: because one of the key area of inflation where it's 512 00:24:38,800 --> 00:24:42,560 Speaker 1: coming from and their cost increases is the rates. Maybe 513 00:24:42,600 --> 00:24:44,399 Speaker 1: not so much the insurance premiums, there's a wee bit 514 00:24:44,400 --> 00:24:46,600 Speaker 1: of a plataum in going there, but the council rates 515 00:24:46,640 --> 00:24:48,960 Speaker 1: going up. They've got a monopoly. There's nothing you can 516 00:24:49,000 --> 00:24:52,000 Speaker 1: do about it, and so that is affecting. I guess 517 00:24:52,119 --> 00:24:54,560 Speaker 1: for a lot of older people, their thoughts about what 518 00:24:54,560 --> 00:24:57,160 Speaker 1: can I afford to spend in retirement? Can I even 519 00:24:57,160 --> 00:24:59,720 Speaker 1: afford to stay in this same house? I would expect 520 00:24:59,720 --> 00:25:02,600 Speaker 1: to events that leads to some people are downshifting out 521 00:25:02,640 --> 00:25:04,840 Speaker 1: into the regions because they're going to be able to 522 00:25:04,880 --> 00:25:07,840 Speaker 1: free up some cash in order to pay the pay 523 00:25:07,880 --> 00:25:10,919 Speaker 1: the council rates. And for some of the generation below 524 00:25:11,000 --> 00:25:14,120 Speaker 1: them are the middle generation older than the kids, which 525 00:25:14,119 --> 00:25:16,919 Speaker 1: are going to Australia for some of them increasingly, the 526 00:25:16,960 --> 00:25:19,200 Speaker 1: answer is, and this is just one factor in there. 527 00:25:19,359 --> 00:25:22,040 Speaker 1: I'm following my kids to Australia. I've got a neighbor 528 00:25:22,160 --> 00:25:24,200 Speaker 1: during that they're selling up and following their two kids 529 00:25:24,240 --> 00:25:28,760 Speaker 1: across to the Gold Coast. So that generation the late thirties, forties, 530 00:25:28,800 --> 00:25:30,920 Speaker 1: early fifties they go, I'm out of here. 531 00:25:30,960 --> 00:25:31,200 Speaker 2: Man. 532 00:25:31,600 --> 00:25:33,800 Speaker 1: That is a new phenomena out there in terms of 533 00:25:33,800 --> 00:25:36,679 Speaker 1: some population loss for New Zealand. And some of them 534 00:25:36,720 --> 00:25:38,639 Speaker 1: would have been people who might otherwise have been thinking 535 00:25:38,880 --> 00:25:42,679 Speaker 1: time to prepare for retirement. Let's get an investment property. No, 536 00:25:43,200 --> 00:25:47,600 Speaker 1: they're not going to they're going to look at going overseas. 537 00:25:47,880 --> 00:25:51,400 Speaker 2: But look, you often spend quite a bit of time 538 00:25:51,440 --> 00:25:55,080 Speaker 2: actually in Australia. You've got property there yourself. What are 539 00:25:55,080 --> 00:25:57,240 Speaker 2: the pickings there? Is it better to be trying to 540 00:25:57,280 --> 00:25:59,600 Speaker 2: buy property over there if you want to have that esset. 541 00:26:00,440 --> 00:26:02,439 Speaker 1: I've got no view on that. I mean, I'm not 542 00:26:02,480 --> 00:26:05,000 Speaker 1: a property investor myself, so I've got no idea about 543 00:26:05,000 --> 00:26:08,560 Speaker 1: what's a reasonable yield or anything like that. The Australian market, 544 00:26:08,600 --> 00:26:11,280 Speaker 1: you've got to be careful because the rules vary from 545 00:26:11,400 --> 00:26:15,920 Speaker 1: state to state, like in Queensland as a foreigner, even 546 00:26:15,920 --> 00:26:17,639 Speaker 1: tho it's a keywet you'll pay an extra ten percent 547 00:26:17,720 --> 00:26:19,920 Speaker 1: sort of stamp duty, three percent local stamp duty and 548 00:26:19,960 --> 00:26:24,359 Speaker 1: then an extra seven percent foreigner buying situation it varies 549 00:26:24,560 --> 00:26:26,639 Speaker 1: in the other states, but first of all, you need 550 00:26:26,680 --> 00:26:29,360 Speaker 1: to talk to a lawyer or accountant over there, figure 551 00:26:29,359 --> 00:26:31,240 Speaker 1: out what's going on there, and just be aware there 552 00:26:31,320 --> 00:26:35,360 Speaker 1: is quite a difference between the top eight capital cities 553 00:26:35,560 --> 00:26:39,560 Speaker 1: and the regional towns. It's dynamic which is more volatile 554 00:26:39,600 --> 00:26:42,040 Speaker 1: than we have in New Zealand. They talk about sea 555 00:26:42,160 --> 00:26:45,480 Speaker 1: change people retiring to be near the sea side, or 556 00:26:45,640 --> 00:26:48,480 Speaker 1: tree change that are going out into the countryside to 557 00:26:48,520 --> 00:26:52,040 Speaker 1: be near more trees, and that dynamic is quite different 558 00:26:52,119 --> 00:26:54,919 Speaker 1: from in New Zealand because the countryside here is not 559 00:26:54,920 --> 00:26:57,919 Speaker 1: really all that far away from our main cities. So 560 00:26:57,960 --> 00:27:00,360 Speaker 1: people definitely need to do a bit of research over 561 00:27:00,400 --> 00:27:02,840 Speaker 1: there and don't always assume that the places are going 562 00:27:02,880 --> 00:27:06,720 Speaker 1: to be greatly cheaper, especially if you're looking at one 563 00:27:06,760 --> 00:27:09,960 Speaker 1: of the major cities. Sydney is vastly expensive, for instance, 564 00:27:10,280 --> 00:27:11,280 Speaker 1: so do your research. 565 00:27:12,800 --> 00:27:16,600 Speaker 2: Also, we've had changes here or are about to happen 566 00:27:16,680 --> 00:27:20,800 Speaker 2: with foreign buyers. I wondered whether that had had any 567 00:27:20,840 --> 00:27:24,720 Speaker 2: effect or because it's such a high net worth situation 568 00:27:24,960 --> 00:27:28,080 Speaker 2: that it may it's all too early to have any idea. 569 00:27:28,240 --> 00:27:32,160 Speaker 1: Well, given New Zealand First is in the governing coalition 570 00:27:32,560 --> 00:27:35,959 Speaker 1: and they're opposed to reopening the housing market. Generally, if 571 00:27:35,960 --> 00:27:37,760 Speaker 1: we get any easing up, it's only going to be 572 00:27:37,760 --> 00:27:40,679 Speaker 1: for the more expensive houses out there. It's really not 573 00:27:40,720 --> 00:27:43,159 Speaker 1: going to be relevant for the housing market of interest 574 00:27:43,240 --> 00:27:45,760 Speaker 1: to ninety nine percent of people out there, quite frankly, 575 00:27:46,400 --> 00:27:48,280 Speaker 1: So yeah, no, I don't see that one really coming 576 00:27:48,280 --> 00:27:51,800 Speaker 1: along and causing an extra bush upward in our housing market. 577 00:27:51,800 --> 00:27:53,160 Speaker 1: It's just not going to happen. 578 00:27:54,160 --> 00:27:58,000 Speaker 2: Other factors migration. We've talked a little bit about the 579 00:27:58,040 --> 00:28:01,199 Speaker 2: fact that the brain drain an uprightists are going to 580 00:28:01,240 --> 00:28:03,920 Speaker 2: Australia and probably buying them and probably not coming back. 581 00:28:04,000 --> 00:28:06,840 Speaker 2: Their parents are following them. As you've just said, what 582 00:28:06,960 --> 00:28:09,600 Speaker 2: about people coming into the country, And that usually has 583 00:28:09,720 --> 00:28:12,600 Speaker 2: an effect on the property market, doesn't it usually? 584 00:28:12,680 --> 00:28:14,359 Speaker 1: But we've got to be careful because we've had this 585 00:28:14,400 --> 00:28:17,439 Speaker 1: period of weakness in the housing market, even though we 586 00:28:17,480 --> 00:28:20,320 Speaker 1: had like in the year October twenty twenty three and 587 00:28:20,359 --> 00:28:22,240 Speaker 1: the record net gain of one hundred and thirty five 588 00:28:22,280 --> 00:28:26,879 Speaker 1: thousand people. So the correlation is not necessarily as strong 589 00:28:26,920 --> 00:28:29,639 Speaker 1: as people think when people talk about a correlation of 590 00:28:29,680 --> 00:28:32,960 Speaker 1: all the net migration numbers driving Auckland in particular. People 591 00:28:33,040 --> 00:28:35,480 Speaker 1: used to always talk about about that. Well, that's usually 592 00:28:35,480 --> 00:28:37,439 Speaker 1: only if the market is rising already, and they go 593 00:28:37,600 --> 00:28:40,400 Speaker 1: market's rising, I wonder why, Oh, the net migration is 594 00:28:40,400 --> 00:28:43,040 Speaker 1: strong and they grab onto that. But most migrants coming 595 00:28:43,040 --> 00:28:44,400 Speaker 1: into New Zealand they're not going to be able to 596 00:28:44,400 --> 00:28:46,000 Speaker 1: buy a house for a long period of time. They've 597 00:28:46,000 --> 00:28:48,640 Speaker 1: probably got no money. They're coming into New Zealand because 598 00:28:48,680 --> 00:28:50,480 Speaker 1: they've got no money and they can get a job 599 00:28:50,760 --> 00:28:53,160 Speaker 1: and build their life and their family, you know, starting 600 00:28:53,200 --> 00:28:55,920 Speaker 1: up a new here. So you know there's probably x 601 00:28:56,040 --> 00:28:58,840 Speaker 1: billion two three billion people overseas who if you gave 602 00:28:58,880 --> 00:29:00,400 Speaker 1: them the ticket, will be on the plane tomorrow and 603 00:29:00,440 --> 00:29:03,640 Speaker 1: come across to New Zealand. From an accommodation point of view, 604 00:29:03,720 --> 00:29:05,880 Speaker 1: it would have upward pressure on our market. But in 605 00:29:05,960 --> 00:29:08,120 Speaker 1: terms of a house buying, it'll depends if we buy 606 00:29:08,160 --> 00:29:10,360 Speaker 1: the properties to go and rent to them would be 607 00:29:10,400 --> 00:29:13,640 Speaker 1: the main dynamic there. I've proven, I think to myself 608 00:29:13,680 --> 00:29:15,760 Speaker 1: from over thirty years ago, and I reckon the other 609 00:29:15,800 --> 00:29:19,560 Speaker 1: economists have reached the same Cook conclusion. You cannot forecast 610 00:29:19,720 --> 00:29:22,560 Speaker 1: net migration flows in New Zealand, not even six to 611 00:29:22,600 --> 00:29:25,560 Speaker 1: twelve months ahead. You cannot do it. So we take 612 00:29:25,600 --> 00:29:27,120 Speaker 1: these things as they come. 613 00:29:27,920 --> 00:29:30,360 Speaker 2: Tony keen to find out what your outlook for the 614 00:29:30,480 --> 00:29:33,840 Speaker 2: year is now that we've had another cut and possibly 615 00:29:33,920 --> 00:29:36,160 Speaker 2: will have some more. But it's not just about interest 616 00:29:36,240 --> 00:29:37,080 Speaker 2: rate cuts. 617 00:29:37,680 --> 00:29:39,520 Speaker 1: No, No, there's more in the mix there. There are 618 00:29:39,560 --> 00:29:42,080 Speaker 1: definitely some positives for the New Zealand economy. The Reserve 619 00:29:42,120 --> 00:29:44,880 Speaker 1: Bank predicting the economy will grow about zero point six 620 00:29:44,920 --> 00:29:47,880 Speaker 1: percent a quarter from here on out possible. I think 621 00:29:47,880 --> 00:29:50,120 Speaker 1: they could be a little bit optimistic. But you're the 622 00:29:50,120 --> 00:29:54,560 Speaker 1: positives of the interest rate pain easing away and disappearing. 623 00:29:54,640 --> 00:29:57,680 Speaker 1: That's completely different from saying there's an interest rate boost 624 00:29:57,760 --> 00:30:00,880 Speaker 1: coming along, which is more your pandemic pece GFC that 625 00:30:00,960 --> 00:30:03,720 Speaker 1: sort of thing. The dairy payout, so that's positive for 626 00:30:03,720 --> 00:30:05,880 Speaker 1: the dairying regions, not so much of an impact on 627 00:30:05,920 --> 00:30:07,480 Speaker 1: the rest of the country. 628 00:30:07,520 --> 00:30:07,840 Speaker 2: There. 629 00:30:08,640 --> 00:30:11,760 Speaker 1: World economy neither here nor there too greatly I think, 630 00:30:11,760 --> 00:30:18,240 Speaker 1: and causing too much to happen there. Construction, yeah, infrastructure 631 00:30:18,280 --> 00:30:21,480 Speaker 1: it's a slow burn to improve, so that'll be a stimulant, 632 00:30:21,520 --> 00:30:25,200 Speaker 1: but it's incremental over a long period of time. Commercial 633 00:30:25,240 --> 00:30:28,360 Speaker 1: I definitely see some positives here on the commercial construction side, 634 00:30:28,560 --> 00:30:32,640 Speaker 1: house building, standalone houses improving later this year. Townhouse construction 635 00:30:32,840 --> 00:30:34,920 Speaker 1: just falling straight lining away. I think to some point 636 00:30:34,920 --> 00:30:37,960 Speaker 1: in twenty twenty six is going to be a restraint 637 00:30:38,000 --> 00:30:40,080 Speaker 1: on growth. I think there's scope for a few more 638 00:30:40,120 --> 00:30:43,920 Speaker 1: foreign students to come into New Zealand. On the tourism side, yeah, 639 00:30:43,960 --> 00:30:46,160 Speaker 1: I guess maybe the government's new campaign will drag a 640 00:30:46,160 --> 00:30:48,719 Speaker 1: few more people into New Zealand. It's got a lot 641 00:30:48,720 --> 00:30:51,520 Speaker 1: of publicity overseas, so it's so good on them. It 642 00:30:51,560 --> 00:30:54,200 Speaker 1: doesn't boost the productivity in our economy, it doesn't boost 643 00:30:54,240 --> 00:30:56,440 Speaker 1: our income per capita or at all, just more people 644 00:30:56,480 --> 00:31:00,800 Speaker 1: serving in the cafeterias, cafes, et cetera. But overall, my 645 00:31:00,880 --> 00:31:03,720 Speaker 1: outlookers for the economy to improve, and I guess my 646 00:31:03,800 --> 00:31:07,000 Speaker 1: focus will be mainly when does that lead to people's 647 00:31:07,040 --> 00:31:10,720 Speaker 1: feelings about the labor market changing? When do people feel 648 00:31:10,760 --> 00:31:13,080 Speaker 1: a greater amount of job security. I'll be able to 649 00:31:13,080 --> 00:31:15,760 Speaker 1: see that straight away in my real estate survey, because 650 00:31:15,840 --> 00:31:17,400 Speaker 1: I asked the agents and they're right at the cold 651 00:31:17,400 --> 00:31:20,160 Speaker 1: face and they'll see it. I'd'm thinking that there's sometime 652 00:31:20,200 --> 00:31:22,520 Speaker 1: in the second half of this year and that will 653 00:31:22,560 --> 00:31:25,720 Speaker 1: then I think flow through to the housing market putting 654 00:31:25,760 --> 00:31:28,440 Speaker 1: in a better performance. But for the moment while, I've 655 00:31:28,480 --> 00:31:30,440 Speaker 1: still got about a net fifty one percent of the 656 00:31:30,480 --> 00:31:33,040 Speaker 1: agents saying all people are worried about their jobs or sorry, 657 00:31:33,040 --> 00:31:35,000 Speaker 1: a gross fifty one percent. It's just going to keep 658 00:31:35,000 --> 00:31:36,560 Speaker 1: a bit of a dampner on the housing market for 659 00:31:36,600 --> 00:31:37,640 Speaker 1: the first half of this year. 660 00:31:38,560 --> 00:31:40,600 Speaker 2: Thanks Tony for coming in and joining us in the 661 00:31:40,640 --> 00:31:43,959 Speaker 2: studio today, and thanks everyone for joining in. You can 662 00:31:44,000 --> 00:31:47,160 Speaker 2: watch Shared Lunch on YouTube or follow the podcast on 663 00:31:47,200 --> 00:31:50,440 Speaker 2: your favorite podcast app. Leave us a racing and tell 664 00:31:50,520 --> 00:31:58,880 Speaker 2: us what you'd like to hear next. Ma Taba