Speaker 1: It's challenging. I think for the investors out there, the
Speaker 1: maintenance costs, the insurance costs in particular, and of course
Speaker 1: the council rates just bang bang bang. I certainly expect
Speaker 1: house prices to go up. I mean where they sit
Speaker 1: on average at the moment is basically exactly where they
Speaker 1: were four years ago, so early twenty twenty one, by
Speaker 1: our lookers. For the economy to improve, when does that
Speaker 1: lead to people's feelings about the labor market changing? When
Speaker 1: do people feel a greater amount of job security?
Speaker 2: Cura and Welcome to Shed Lunch, brought to you by Shehz's.
Speaker 2: I'm Helen Madison. Today on the program, we take a
Speaker 2: pulse check of the property market. Will more interest rate
Speaker 2: can'ts revive house prices that have been down more than
Speaker 2: twenty percent in some regions, or will investors and sellers
Speaker 2: be disappointed? Independent economist Tony Alexander has been mulling over
Speaker 2: the numbers and the sentiment before we dive in. Here's
Speaker 2: some important information for you to consider.
Speaker 3: Investing in risk you might lose the money you start with.
Speaker 3: We recommend talking to a licensed financial advisor. We also
Speaker 3: recommend reading product disclosure documents. Before deciding to invest. Everything
Speaker 3: you're about to see and hear is current at the
Speaker 3: time of recording.
Speaker 2: Welcome Tony. Great to see you in person in the
Speaker 2: studio for the first time.
Speaker 1: Yes, yes, now it's good to be here in person
Speaker 1: rather than just down the remote camera from Australia.
Speaker 2: Sometimes. That's right, let's get into it. Then, interest rates
Speaker 2: are on the downward cycles, and I know you've said
Speaker 2: before that you think the cuts that we're having will
Speaker 2: finish or bottom out mid twenty twenty five. Last week
Speaker 2: the Reserve Bank did what we thought it would do
Speaker 2: and they reduce rates by fifty basis points. So we're
Speaker 2: three point seventy five anything in that monetary policy statement
Speaker 2: which a company. That announcement has made you think differently
Speaker 2: from where the bottom might be.
Speaker 1: Well, previously I thought maybe three point five percent would
Speaker 1: be the bottom. But the Reserve Bank, first of all,
Speaker 1: they brought forward in time by about a year when
Speaker 1: they see monetary policy reaching its bottom, and the low
Speaker 1: point they've got there is either three or three point
Speaker 1: twenty five percent. In the document it says three point
Speaker 1: one percent. Well, we're not going to get three point
Speaker 1: one percent. It's going to be three or three point
Speaker 1: twenty five, and I think they've given a strong benefit
Speaker 1: of the doubt to the upturn they see in the
Speaker 1: economy not really driving much inflation. So maybe three point
Speaker 1: twenty five percent, I guess, is where I think we're
Speaker 1: going to see the bottom the for the official cash rate,
Speaker 1: and chances are that's going to be around near the
Speaker 1: middle of the.
Speaker 2: Year, so similar to what you saw before. What about
Speaker 2: house prices though, because this seems to be quite a
Speaker 2: bit of optimism out there that these this downward cycling
Speaker 2: rates will actually lift prices, which, as we know, have
Speaker 2: been down They've been twenty percent in some places. What's
Speaker 2: your view on where house prices are going, because you
Speaker 2: have seen one stage they could even go up.
Speaker 1: Yeah, yeah, well, I certainly expect house prices to go up.
Speaker 1: I mean where they sit on average at the moment
Speaker 1: is basically exactly where they were four year years ago,
Speaker 1: so early twenty twenty one, when we're already seeing a
Speaker 1: bit of a surge with the pandemic and very low
Speaker 1: interest rates and Alvir's gone et cetera. Just recently, when
Speaker 1: I look at the data from ARII and Z in particular,
Speaker 1: it seems to me they're not really going anywhere quite frankly.
Speaker 1: We saw a bit of a movement upward twenty twenty
Speaker 1: three with the first home buyers going into the market,
Speaker 1: and then that sort of faded away, and again in
Speaker 1: twenty twenty four. We saw a bit of a movement
Speaker 1: upwards around about the middle of the year July, August,
Speaker 1: et cetera, when talk a rows of interest rates going down,
Speaker 1: but that sort of faded a bit over summer as well.
Speaker 1: So for the moment, I'd say the market is flat,
Speaker 1: but I would expect, yes, interest rates going down, people
Speaker 1: rolling on to low interest rates for out a bit
Speaker 1: of cash. It's going to be I think when people
Speaker 1: have a bit more confidence about their jobs, the labor
Speaker 1: market improving, that's maybe more when it's reasonable to think
Speaker 1: about we're going to have a long string of small
Speaker 1: increases each month coming along.
Speaker 2: It does seem to be maybe anecdotally, a lot of
Speaker 2: listings out there at the moment, and I do wonder
Speaker 2: whether it's about sellers are readjusting their expectations when it
Speaker 2: comes to price, because it would appear that it's a
Speaker 2: bit of a buyer's market and that sellers really maybe
Speaker 2: can't get what they thought. They did. Look this week
Speaker 2: at Ryman Healthcare, the retirement operator that's listed, and that's
Speaker 2: going to raise another one billion dollars in capital. And
Speaker 2: one of the reasons they said they were doing that
Speaker 2: is that people that were thinking about coming into the
Speaker 2: retirement village hadn't been able to sell their houses at
Speaker 2: the price they liked, so they've deferred coming in. So
Speaker 2: Ryman's got extra stock that's empty. So yeah, I just
Speaker 2: wondered what your perspective on that was.
Speaker 1: Yeah, Well, if you look at the data from real
Speaker 1: estate dot co dot Nz, they have total listings sitting
Speaker 1: around about thirty two to thirty three thousand at the moment,
Speaker 1: that's up about eighteen one eight percent from a year ago.
Speaker 1: Compare that with under fourteen thousand in the middle of
Speaker 1: twenty twenty one, So it's quite a change from back then.
Speaker 1: And I guess what I'm perceiving in the housing market
Speaker 1: now is that there are more people willing to sell.
Speaker 1: That's what happened in twenty twenty three. The first buyers
Speaker 1: went into the market are the first home buyers. Then
Speaker 1: some of the investors moved into the market, and then
Speaker 1: a lot of investors sellers. They stepped into the market,
Speaker 1: and we saw a similar sort of thing last year,
Speaker 1: and so there are a number of people who want
Speaker 1: to sell, get on with their lives, et cetera. But
Speaker 1: it is definitely strongly a buyer's market. In my survey
Speaker 1: of real estate agents, I've got a net forty percent
Speaker 1: of them saying it's a buyer's market still. And when
Speaker 1: it comes to the vendors willing to capitulate too, many
Speaker 1: have memories of where the prices were, you know, two
Speaker 1: three years or so ago, So a lot of them
Speaker 1: still aren't willing to discount, you know, to meet the
Speaker 1: market and get on with their life, whether it be
Speaker 1: retirement or shifting, et cetera. So there could easily still
Speaker 1: be a little bit more downward price adjustment to the
Speaker 1: very near future, but I think it's more going to
Speaker 1: be the buyers coming back into the market later this
Speaker 1: year as the employment situation looks better. But certainly the
Speaker 1: vendors are out there.
Speaker 2: Where does that leave the investors then? I mean, perhaps
Speaker 2: because the prices are depressed, there's some not so much bargains,
Speaker 2: but there's some reasonable pickings.
Speaker 1: Yeah, it's challenging, I think for the investors out there
Speaker 1: because the cost of running a rental business is now
Speaker 1: so much more than before, the maintenance costs, the insurance
Speaker 1: cost in particular, and of course the council rates just
Speaker 1: bang bang bang, everyone around the country being told, well,
Speaker 1: this is what you're getting this year, Like in the
Speaker 1: Hut Valley there, I think lober Hunt it might have
Speaker 1: been fifteen percent they're getting this year, and plans are
Speaker 1: for the same next year, bang bang, you know for
Speaker 1: a few years after that. So that just changes the
Speaker 1: dynamic and the investors have to think, Okay, costs are
Speaker 1: going up, what is my ability to get extra rent
Speaker 1: coming through? Not good? At the moment. I've got about
Speaker 1: a net twenty one percent or so of landlords in
Speaker 1: a survey that I run saying it is very difficult
Speaker 1: to get a good tend the moment a year ago
Speaker 1: in net twenty percent was saying it's easy to get
Speaker 1: a good tenant. So for the investors, I know, I
Speaker 1: see some commentary out there people saying we see the
Speaker 1: investors coming back into the market as buyers. I think
Speaker 1: that flow is relatively small out there. The bigger change
Speaker 1: is the investors as sellers. So again in my survey
Speaker 1: of the property investors, I have about a net fourteen
Speaker 1: percent of the landlord saying they're looking to sell now.
Speaker 1: The last time that measure was positive, as in more
Speaker 1: looking to buy than sell, was about March of twenty
Speaker 1: twenty three, and the proportions saying they want to buy
Speaker 1: gross number it's unchanged about twenty one percent, So twenty
Speaker 1: one percent of the landlord saying yeah, I'd like to buy,
Speaker 1: same now as a year and a half or two
Speaker 1: years ago. What's changed is that back there early twenty
Speaker 1: twenty three, I only had about twenty percent saying I'm
Speaker 1: looking to sell. Now it's thirty five percent. So this
Speaker 1: is the change in the investor market in the past
Speaker 1: sor twelve to eighteen months. More in the of the
Speaker 1: investors are looking to sell. The numbers don't quite add
Speaker 1: up for them, and they're not expect acting rapid capital
Speaker 1: gain in the near future. So that to me is
Speaker 1: the main change out there, not necessarily any great change
Speaker 1: in investors buying. There's more investors looking to sell and
Speaker 1: maybe put the money somewhere.
Speaker 2: Else Tony, when you say investor money is probably going elsewhere,
Speaker 2: do we have any inkling on where that might be,
Speaker 2: is it listed property trust? Is it even commercial property,
Speaker 2: which I think has come back a little well.
Speaker 1: Certainly people have had a strong interest in commercial property
Speaker 1: for the past three to four years. With the residential
Speaker 1: market moving backwards, investors, when we're looking for something different,
Speaker 1: I'm having to learn about earthquake ratings, et cetera. Out there,
Speaker 1: there has actually been relatively good demand from tenants for
Speaker 1: commercial property, or more essentially in terms of upgrading. A
Speaker 1: lot of businesses. They need to boost their productivity, they
Speaker 1: need to look for cost savings, et cetera. So there's
Speaker 1: a lot of restructuring happening in the say the logistics side.
Speaker 1: The warehouse over there doesn't work any longer. You need
Speaker 1: a bigger one over there, meaning you can close two
Speaker 1: or the other warehouses. You want something maybe near one
Speaker 1: of the motorways, etc. There seems to be a lot
Speaker 1: of construction of new commercial buildings in that regard. The
Speaker 1: demand for office space has sort of shifted towards strong
Speaker 1: support for the prime stuff out there, not so much
Speaker 1: for the lower grades as yet. But yeah, that there's
Speaker 1: actually been strong interest for the commercial property I think
Speaker 1: for some time. I guess the relevant thing there is
Speaker 1: that when interstrates go down, the interest in commercial property
Speaker 1: goes up. My view is that interstrate's going down that
Speaker 1: are relevant to the commercial property investors three five ten
Speaker 1: year interst rates. We're probably just about near the end
Speaker 1: of those interrastrate falls, So I don't necessarily think commercial
Speaker 1: property demand is going to rise all that much over
Speaker 1: and above what you'd naturally expect with the economy starting
Speaker 1: to improve this year.
Speaker 2: If we look around the country, it does appear to
Speaker 2: be a bit of a mixed picture. If we think
Speaker 2: back to the residential property market, I think in your
Speaker 2: surveys of real estate agents that look like Northland was
Speaker 2: still a bit subdued. Auckland has a ton of listings.
Speaker 2: I think they have plenty was coming back but strongly.
Speaker 2: Harks Bay similar, Wellington still in the dulgrums. South Island
Speaker 2: a bit of a bright spot. What's your view on
Speaker 2: that picture? Yeah?
Speaker 1: Yeah, Regionally it is reasonably diverse. Christ Church, I think
Speaker 1: there's good economic support in terms of the tourist numbers.
Speaker 1: There's still recovery to happen there. Rejuvenation of the CBD
Speaker 1: will rebuilding of it, et cetera. The affordability of housing
Speaker 1: is a big positive as well. So I've long had
Speaker 1: a positive view on christ Church slash Canterbury, and when
Speaker 1: I say Canterbury, South Canterbury of course with a dairy
Speaker 1: payout being pretty strong, so that's going to be positive
Speaker 1: for Irashburton's tim marous et cetera. Or setting some of
Speaker 1: the freezing works are lost down in tomorrow. For instance,
Speaker 1: in Auckland Yere there's an oversupplied town houses and that's
Speaker 1: sort of dominating the market in people's thinking at the moment,
Speaker 1: especially out the west Auckland direction on northwest, and it's
Speaker 1: going to take a while for that to run through,
Speaker 1: and part of that running through is then there will
Speaker 1: be a further decrease in townhouse construction and it'll set
Speaker 1: the scene for maybe it's eighteen months from now, people
Speaker 1: will look around and go not too many spare townhouses,
Speaker 1: Maybe we need to build some more, and then there'll
Speaker 1: be a lag and building some more over twenty twenty six,
Speaker 1: So that cycle is going to be interesting for Auckland.
Speaker 1: A wee bit further out, christ Church maybe has a
Speaker 1: little bit of oversupply of some townhouses in the CBD,
Speaker 1: just a little bit there Wellington. People have to be careful.
Speaker 1: There's Wellington City and then lower Heart, Upper Hut Capity
Speaker 1: Coast and back towards Poiriuha. For Wellington City, there are
Speaker 1: challenges under Labors government. We saw the number of public
Speaker 1: servants go up about eighteen one eight thousand, and obviously
Speaker 1: a lot of them are losing their jobs. Now there's
Speaker 1: clearly going to be more restructuring, slash redundancies in the
Speaker 1: public service. The government has to address it. Seventeen billion
Speaker 1: dollar deficit. There's extra money going to have to clearly
Speaker 1: be able allocated for defense as well, and so that
Speaker 1: is going to keep Wellington depressed for I think you
Speaker 1: quite all of this year quite frankly, maybe into bit
Speaker 1: of twenty twenty six for the city, but not necessarily
Speaker 1: the same for the Hut Valley and up Capiti Coast.
Speaker 1: There's just so much development going to be happening up there,
Speaker 1: Transmission Gully Motorway in place, and of course the expressway
Speaker 1: getting extended to north of Livin as well. So have
Speaker 1: a positive view there. Why Kato Taranaki, they're going to
Speaker 1: benefit again from the dairy payout being relatively good. Not
Speaker 1: that I have any particularly divergent view on New Plymouth.
Speaker 1: It's just a good always a good solid underpinning there.
Speaker 1: Quite frankly, yeah, Toweronger may have to wait till there's
Speaker 1: a bit more strength in Auckland and then the user
Speaker 1: will sell your house in Auckland, get a good price,
Speaker 1: retire across to Toweronger. That engine will start a chugging
Speaker 1: away again. But it's not really doing it at the moment.
Speaker 2: Let's think about mortgage holders. I mean, I think at
Speaker 2: least half have fixed at quite short terms. So we're
Speaker 2: talking six months in one year. With rates nearly bottoming,
Speaker 2: people are probably thinking what do do and do you
Speaker 2: think we're going to see a change to those longer
Speaker 2: term rates. That said, this week there seems to be
Speaker 2: a bit of a war between ASP and Westpac that
Speaker 2: two year rate at four point ninety nine. What's your thoughts?
Speaker 1: Well, when west Pac for two weeks had three years
Speaker 1: at four point nine to nine, I jumped up and
Speaker 1: down and said now that is what I would take basically,
Speaker 1: and it didn't. The other banks didn't jump in. It
Speaker 1: didn't last, and so yeah, I see the competition is
Speaker 1: for the two year period. If I had a mortgage
Speaker 1: at the moment, and I was thinking I'll get a
Speaker 1: lot of it repaid in the next two years. I
Speaker 1: personally would probably take the two years at four point
Speaker 1: nine to nine percent. I see no great benefit any longer. Personally,
Speaker 1: it's sticking floating six months, twelve months. Those rates will
Speaker 1: come down a bit further. Do I think people need
Speaker 1: to hurry. I don't see the upward leg of the
Speaker 1: monetary policy cycles starting again until maybe late twenty six,
Speaker 1: maybe twenty twenty seven. But that's the next shift in
Speaker 1: the market. In terms of thinking about interest rates, it's
Speaker 1: all been monetary policy is easing.
Speaker 2: It's easing.
Speaker 1: Eventually it stops seizing. Oh, that's going to be later
Speaker 1: on this year, second half of this year.
Speaker 2: Okay.
Speaker 1: I wonder when it goes up back up again. The
Speaker 1: market's not really there yet. When that happens, you'll probably
Speaker 1: start to see them upward movement in the three to
Speaker 1: five year wholesale borrowing costs for the banks and those
Speaker 1: interrast rates rising. That might be a story for next year.
Speaker 1: Most people, being kiwis, are only going to fix for
Speaker 1: two years, three years. A few will jump in the
Speaker 1: even when the five year rate was at two point
Speaker 1: nine nine percent. Hardly anybody fix back then from twenty
Speaker 1: twenty to twenty twenty one. But most people are probably
Speaker 1: going to be reasonably happy in the two year period.
Speaker 1: And what's going to happen Take ourselves two years from now,
Speaker 1: so that's twenty twenty seven. Interest rates might be going
Speaker 1: up by then. So that's the difficulty. You fix two
Speaker 1: years at the moment because it seems to be pretty attractive.
Speaker 1: Your rate's going to mature right when there's upside risk
Speaker 1: on the interest rates coming forward, and then you're going
Speaker 1: to have a bit of a problem. So that's one
Speaker 1: reason I was such in favor of three years four
Speaker 1: ninety nine. Maybe it comes back again and again I'd
Speaker 1: probably say that's what I would personally go for.
Speaker 2: So a conundrum for people fixing longer or shorter. Yep,
Speaker 2: it's almost like timing the market.
Speaker 1: Sometimes something sticks out and you say, well, I don't
Speaker 1: really have a view on where rates are going to
Speaker 1: go in the near future, but this one seems screen's
Speaker 1: quite good. And that was the two ninety nine to
Speaker 1: five year one from twenty twenty twenty one, and I think,
Speaker 1: like I say, close to five percent were just under
Speaker 1: for three years I mean, if there was a four
Speaker 1: or five year rate, I'd probably take that at four
Speaker 1: point nine nine percent. If one of the banks was
Speaker 1: going to offer that, they probably won't because the competition
Speaker 1: where people are looking is more in the two year
Speaker 1: time frame.
Speaker 2: Quite frank, Yeah, and that's hence why I think ASP
Speaker 2: and Wespeck have done what they had And also that
Speaker 2: seems to be one of the few moves. Most of
Speaker 2: the rate moves since the OCR last week is floating.
Speaker 1: Yeah, well, floating is really closely tied to the cash rate.
Speaker 1: It goes up, goes up, it goes down. The float
Speaker 1: at the more rate will come down. The one year
Speaker 1: fixed rates will also tend to move, but once you
Speaker 1: get out further along the year curve, this reflects expectations
Speaker 1: of where the market is going to go. And the
Speaker 1: reason we haven't seen like fresh cuts in three, four
Speaker 1: or five year mortgage rates is because the markets had
Speaker 1: already factored in that the low point for the cash
Speaker 1: rate isn't going to be twenty twenty six or twenty seven,
Speaker 1: it's going to be the end of this year. So
Speaker 1: the Reserve Bank merely validated what the market had already moved.
Speaker 1: Towards and that's why most of us are now thinking
Speaker 1: we are probably at the low point in the cycle
Speaker 1: for three, four or five year fixed rates, bank borrowing costs,
Speaker 1: and the mortgage rates. Two years there could be a
Speaker 1: little bit more downside, but I really think it's going
Speaker 1: to be pretty limited from here.
Speaker 2: With those longer term rates too. Isn't that what the
Speaker 2: geopolitical kind of world economy and the effects that it has.
Speaker 2: Isn't that more something that affects those rates and those
Speaker 2: shorter term right?
Speaker 1: Yeah, most definitely. If there's a big shock out there,
Speaker 1: then the Reserve Bank will respond one way or another.
Speaker 1: Are to that, And of course they expressed a lot
Speaker 1: of uncertainty in their monetary policy statement about what's going
Speaker 1: to happen in the world economy, because well, duh, none
Speaker 1: of us know exactly what is going to happen. You
Speaker 1: think to yourself, Okay, if tariffs go up, there's more inflation. Oh,
Speaker 1: interstrates will be higher. But if tariffs go up, maybe
Speaker 1: that depresses world growth. Oh that means less inflation, That
Speaker 1: means interstrates go down. You just got to take it
Speaker 1: as it comes, quite frankly, See what's going to develop
Speaker 1: out of all of this. So there is a lot
Speaker 1: of uncertainty for the whole interrastrate structure still out there.
Speaker 1: If we're looking ahead it where interstrates are likely to
Speaker 1: go in the very near future. I certainly think it's
Speaker 1: reasonable to expect that come the next review April. I
Speaker 1: think it's early April, they will cut by I think
Speaker 1: not half but quarter of a percent, and then there's
Speaker 1: probably one more after that, So whatever that is six
Speaker 1: or eight weeks after early April. I guess where I
Speaker 1: differ from many others is that I don't think they'll
Speaker 1: take it down to three percent. I think they'll get
Speaker 1: to the three point twenty five percent and pretty much
Speaker 1: say that's probably going to be it. But again, the
Speaker 1: uncertainty out there in the world we're living in a
Speaker 1: Trumpian politics, economics, international environment. We've just got to hang
Speaker 1: on for the ride. Quite frankly, let's.
Speaker 2: Jump back to construction and consense. That's usually a bit
Speaker 2: of a litmus test as to how things are going.
Speaker 2: I do note that renovations seem to be back in vogue.
Speaker 2: Can you tell us a bit about that.
Speaker 1: Yeah, that's interesting that in my Monthly Spending Plans survey
Speaker 1: one of the I think there's only two areas which
Speaker 1: have shown much of a change recently. One is a
Speaker 1: few more people are thinking about buying a house to
Speaker 1: live in themselves. I think that's the first home buyers
Speaker 1: still looking to take advantage of the opportunity out there
Speaker 1: with not much competition from investors. And the other one
Speaker 1: is that things are still relatively depressed and terms of
Speaker 1: people saying I'm going to buy a motor vehicle or appliance.
Speaker 1: But for the home renovations, there's definitely a strong upward
Speaker 1: trend which has gone through there, and maybe for some
Speaker 1: people it's a feeling of there's a few more tradees
Speaker 1: out there now because house building is falling away. There's
Speaker 1: a few more people offering their services electrical plumbing and
Speaker 1: a carpentry, et cetera. So there's an opportunity maybe to
Speaker 1: get some of that work done without having to pay
Speaker 1: an absolute arm and a leg in order to get
Speaker 1: it completed and run the job. The risk of the
Speaker 1: job's not going to be done, you know, for quite
Speaker 1: some time if they shoult off to something that's going
Speaker 1: to pay better in the near term. So I think
Speaker 1: it's that it's also the case, I think that there's
Speaker 1: always the older generation out there looking to improve things,
Speaker 1: heading into retirement or fresh into it, and it looks
Speaker 1: like some of them are deciding, look, I've waited long
Speaker 1: enough unless just finally get this place looking okay. But
Speaker 1: it is a bit of a surprising thing there. It
Speaker 1: is an area of spending growth.
Speaker 2: Bathrooms and kitchens predominantly rather than great, big new housing.
Speaker 1: Does sound like, yeah, yeah, I think so. Yeahs a
Speaker 1: bit of an upgrading of the existing stock or the
Speaker 1: places that people already own out there. I don't think
Speaker 1: my survey there is capturing people saying renovations. Oh, that's
Speaker 1: the granny flat I'm putting out the back. I don't
Speaker 1: think they're including that particular item in there, Tony.
Speaker 2: Just with construction. Let's unpack that little more. What are
Speaker 2: the dynamics there.
Speaker 1: Yeah, the dynamic would be that when you get residential
Speaker 1: real estate turnover of existing you know, used houses picking up,
Speaker 1: it eventually leads to the number of consents being issued
Speaker 1: for new houses to be built picking up. And we've
Speaker 1: seen a bit of an increase in real estate turnover.
Speaker 1: That's about seventy two thousand in the past year. A
Speaker 1: year a year and a half ago it was fifty
Speaker 1: eight thousand. So yes, he's an upward trend, but it's
Speaker 1: relatively mild. And given the oversupply of townhouses which sits
Speaker 1: out there and developers. You see developers that put some
Speaker 1: of these properties into the rental pool, and once they
Speaker 1: see the housing market moving, they're going to offer them
Speaker 1: up for sale. It's going to keep things constrained into
Speaker 1: sort of twenty twenty six, the year. I think the
Speaker 1: townhouse construction keeps going down into twenty twenty six and
Speaker 1: the finance requirement, you know, pre sales, that sort of thing.
Speaker 1: Whereas for individual standalone houses, i'd see that rising before
Speaker 1: the end of this year. Sort of just a combination
Speaker 1: of not so much of an oversupply in that market
Speaker 1: and yeah, just the effect of the interest rates off
Speaker 1: coming through and the labor market perception starting to improve
Speaker 1: as well. But it's going to be a different dynamic
Speaker 1: townhouses versus standalone.
Speaker 2: And is there any areas in particular where you think
Speaker 2: construction will be more buoyant.
Speaker 1: I suppose Again on christ Church, I've got a positive
Speaker 1: view there. The population movement that is happening down there.
Speaker 1: For affordability reasons. All the growth we see down at
Speaker 1: Rollston obviously in particular, but also north of the city
Speaker 1: with the Northern Corridor opening up there, so that's definitely positive.
Speaker 1: Outside of that, again, up the Capity Coast with the
Speaker 1: expressway network is very positive also, an aging population looking
Speaker 1: to retire up there if they can find the land there.
Speaker 1: There is actually a bit of a shortage of land
Speaker 1: in some areas up there. For Auckland, there's going to
Speaker 1: be expansion up the Northwest area for the next few decades,
Speaker 1: quite frankly, but that's where the over supply of the
Speaker 1: townhouses is and where some of these negative stories are
Speaker 1: around it. They get so roasting hot you're having to
Speaker 1: run your AC to cool the place down. So you know,
Speaker 1: us key with is when we when we have a
Speaker 1: house building boom of some regard, it's like something always
Speaker 1: seems to go wrong. It's either leaking or in this case,
Speaker 1: ye're just getting too hot in the upstairs room too
Speaker 1: many windows.
Speaker 2: Quite frankly, let's look at inflation. That's always a big bogie,
Speaker 2: and it does feel from what the Reserve Bank has
Speaker 2: said that things are in check two point two percent,
Speaker 2: and that's kind of their main mandate. You've talked a
Speaker 2: lot about cyclical inflation, which, as I understand it is
Speaker 2: almost a natural phenomenon when there's a recovery, when there's
Speaker 2: an upturn, you're probably going to get a bit of inflation.
Speaker 2: You've always worn that that's probably around the corner and
Speaker 2: not as far as way as we think. Have you
Speaker 2: changed your mind on that?
Speaker 1: Yeah, No, No, I still definitely got that view. I
Speaker 1: think some of the upside risk is greater because of
Speaker 1: the risk of tariffs going up, for instance. So now
Speaker 1: I'm still of the view. And what I look at there,
Speaker 1: there's a number of things. One of them is the
Speaker 1: A and Z's Monthly Business Outlook Survey. On average since
Speaker 1: nineteen ninety two, inflation has average two point three percent
Speaker 1: since then, on average, and net twenty six percent of
Speaker 1: businesses have said, yeah, in the next twelve months, I'm
Speaker 1: going to increase my prices. That was eighty two percent
Speaker 1: net two and a half or so years ago, so
Speaker 1: that was horrible inflation seven percent or so. That got
Speaker 1: down to thirty net thirty five percent the middle of
Speaker 1: last year. It's now gone up to a net forty
Speaker 1: six percent of businesses saying I'm going to increase my
Speaker 1: prices in the next twelve months, not now, but when
Speaker 1: the opportunity presents itself. So that says to me, when
Speaker 1: the customer flows are stronger, because businesses have got compressed
Speaker 1: margins at the moment, and because many of their costs
Speaker 1: are still going up. When the opportunity presents itself and
Speaker 1: they think I can get a price increase away and
Speaker 1: people are still going to keep buying my product, they're
Speaker 1: going to do it. And I guess maybe I see
Speaker 1: some of that from later this year and especially in
Speaker 1: twenty twenty six, not at the moment unless you're a
Speaker 1: council or electricity company or you know, oligopoly generally or
Speaker 1: monopoly in the case of a council. But that's my
Speaker 1: perception of the risk further out now. The Reserve Bank
Speaker 1: is not focused on that for the moment. That's something
Speaker 1: I think that they'll be looking at later this year.
Speaker 1: In America, there's a little bit of a look at
Speaker 1: it for their economy, but yeah, it's a focus ICEE
Speaker 1: coming a bit further out, and look, if it looks worrying,
Speaker 1: you'll get the longer term interest rates and the medium
Speaker 1: term rates going up before the end of this year.
Speaker 1: We'll just have to see how that pans out.
Speaker 2: So mor gaduate relief at the moment, but it could
Speaker 2: be that we're going to be paying more.
Speaker 1: For goods and services eventually. I mean the Yeah, the
Speaker 1: inflation rate is going to go up. And this is
Speaker 1: one I guess a big problem for the investors, of course,
Speaker 1: because one of the key area of inflation where it's
Speaker 1: coming from and their cost increases is the rates. Maybe
Speaker 1: not so much the insurance premiums, there's a wee bit
Speaker 1: of a plataum in going there, but the council rates
Speaker 1: going up. They've got a monopoly. There's nothing you can
Speaker 1: do about it, and so that is affecting. I guess
Speaker 1: for a lot of older people, their thoughts about what
Speaker 1: can I afford to spend in retirement? Can I even
Speaker 1: afford to stay in this same house? I would expect
Speaker 1: to events that leads to some people are downshifting out
Speaker 1: into the regions because they're going to be able to
Speaker 1: free up some cash in order to pay the pay
Speaker 1: the council rates. And for some of the generation below
Speaker 1: them are the middle generation older than the kids, which
Speaker 1: are going to Australia for some of them increasingly, the
Speaker 1: answer is, and this is just one factor in there.
Speaker 1: I'm following my kids to Australia. I've got a neighbor
Speaker 1: during that they're selling up and following their two kids
Speaker 1: across to the Gold Coast. So that generation the late thirties, forties,
Speaker 1: early fifties they go, I'm out of here.
Speaker 2: Man.
Speaker 1: That is a new phenomena out there in terms of
Speaker 1: some population loss for New Zealand. And some of them
Speaker 1: would have been people who might otherwise have been thinking
Speaker 1: time to prepare for retirement. Let's get an investment property. No,
Speaker 1: they're not going to they're going to look at going overseas.
Speaker 2: But look, you often spend quite a bit of time
Speaker 2: actually in Australia. You've got property there yourself. What are
Speaker 2: the pickings there? Is it better to be trying to
Speaker 2: buy property over there if you want to have that esset.
Speaker 1: I've got no view on that. I mean, I'm not
Speaker 1: a property investor myself, so I've got no idea about
Speaker 1: what's a reasonable yield or anything like that. The Australian market,
Speaker 1: you've got to be careful because the rules vary from
Speaker 1: state to state, like in Queensland as a foreigner, even
Speaker 1: tho it's a keywet you'll pay an extra ten percent
Speaker 1: sort of stamp duty, three percent local stamp duty and
Speaker 1: then an extra seven percent foreigner buying situation it varies
Speaker 1: in the other states, but first of all, you need
Speaker 1: to talk to a lawyer or accountant over there, figure
Speaker 1: out what's going on there, and just be aware there
Speaker 1: is quite a difference between the top eight capital cities
Speaker 1: and the regional towns. It's dynamic which is more volatile
Speaker 1: than we have in New Zealand. They talk about sea
Speaker 1: change people retiring to be near the sea side, or
Speaker 1: tree change that are going out into the countryside to
Speaker 1: be near more trees, and that dynamic is quite different
Speaker 1: from in New Zealand because the countryside here is not
Speaker 1: really all that far away from our main cities. So
Speaker 1: people definitely need to do a bit of research over
Speaker 1: there and don't always assume that the places are going
Speaker 1: to be greatly cheaper, especially if you're looking at one
Speaker 1: of the major cities. Sydney is vastly expensive, for instance,
Speaker 1: so do your research.
Speaker 2: Also, we've had changes here or are about to happen
Speaker 2: with foreign buyers. I wondered whether that had had any
Speaker 2: effect or because it's such a high net worth situation
Speaker 2: that it may it's all too early to have any idea.
Speaker 1: Well, given New Zealand First is in the governing coalition
Speaker 1: and they're opposed to reopening the housing market. Generally, if
Speaker 1: we get any easing up, it's only going to be
Speaker 1: for the more expensive houses out there. It's really not
Speaker 1: going to be relevant for the housing market of interest
Speaker 1: to ninety nine percent of people out there, quite frankly,
Speaker 1: So yeah, no, I don't see that one really coming
Speaker 1: along and causing an extra bush upward in our housing market.
Speaker 1: It's just not going to happen.
Speaker 2: Other factors migration. We've talked a little bit about the
Speaker 2: fact that the brain drain an uprightists are going to
Speaker 2: Australia and probably buying them and probably not coming back.
Speaker 2: Their parents are following them. As you've just said, what
Speaker 2: about people coming into the country, And that usually has
Speaker 2: an effect on the property market, doesn't it usually?
Speaker 1: But we've got to be careful because we've had this
Speaker 1: period of weakness in the housing market, even though we
Speaker 1: had like in the year October twenty twenty three and
Speaker 1: the record net gain of one hundred and thirty five
Speaker 1: thousand people. So the correlation is not necessarily as strong
Speaker 1: as people think when people talk about a correlation of
Speaker 1: all the net migration numbers driving Auckland in particular. People
Speaker 1: used to always talk about about that. Well, that's usually
Speaker 1: only if the market is rising already, and they go
Speaker 1: market's rising, I wonder why, Oh, the net migration is
Speaker 1: strong and they grab onto that. But most migrants coming
Speaker 1: into New Zealand they're not going to be able to
Speaker 1: buy a house for a long period of time. They've
Speaker 1: probably got no money. They're coming into New Zealand because
Speaker 1: they've got no money and they can get a job
Speaker 1: and build their life and their family, you know, starting
Speaker 1: up a new here. So you know there's probably x
Speaker 1: billion two three billion people overseas who if you gave
Speaker 1: them the ticket, will be on the plane tomorrow and
Speaker 1: come across to New Zealand. From an accommodation point of view,
Speaker 1: it would have upward pressure on our market. But in
Speaker 1: terms of a house buying, it'll depends if we buy
Speaker 1: the properties to go and rent to them would be
Speaker 1: the main dynamic there. I've proven, I think to myself
Speaker 1: from over thirty years ago, and I reckon the other
Speaker 1: economists have reached the same Cook conclusion. You cannot forecast
Speaker 1: net migration flows in New Zealand, not even six to
Speaker 1: twelve months ahead. You cannot do it. So we take
Speaker 1: these things as they come.
Speaker 2: Tony keen to find out what your outlook for the
Speaker 2: year is now that we've had another cut and possibly
Speaker 2: will have some more. But it's not just about interest
Speaker 2: rate cuts.
Speaker 1: No, No, there's more in the mix there. There are
Speaker 1: definitely some positives for the New Zealand economy. The Reserve
Speaker 1: Bank predicting the economy will grow about zero point six
Speaker 1: percent a quarter from here on out possible. I think
Speaker 1: they could be a little bit optimistic. But you're the
Speaker 1: positives of the interest rate pain easing away and disappearing.
Speaker 1: That's completely different from saying there's an interest rate boost
Speaker 1: coming along, which is more your pandemic pece GFC that
Speaker 1: sort of thing. The dairy payout, so that's positive for
Speaker 1: the dairying regions, not so much of an impact on
Speaker 1: the rest of the country.
Speaker 2: There.
Speaker 1: World economy neither here nor there too greatly I think,
Speaker 1: and causing too much to happen there. Construction, yeah, infrastructure
Speaker 1: it's a slow burn to improve, so that'll be a stimulant,
Speaker 1: but it's incremental over a long period of time. Commercial
Speaker 1: I definitely see some positives here on the commercial construction side,
Speaker 1: house building, standalone houses improving later this year. Townhouse construction
Speaker 1: just falling straight lining away. I think to some point
Speaker 1: in twenty twenty six is going to be a restraint
Speaker 1: on growth. I think there's scope for a few more
Speaker 1: foreign students to come into New Zealand. On the tourism side, yeah,
Speaker 1: I guess maybe the government's new campaign will drag a
Speaker 1: few more people into New Zealand. It's got a lot
Speaker 1: of publicity overseas, so it's so good on them. It
Speaker 1: doesn't boost the productivity in our economy, it doesn't boost
Speaker 1: our income per capita or at all, just more people
Speaker 1: serving in the cafeterias, cafes, et cetera. But overall, my
Speaker 1: outlookers for the economy to improve, and I guess my
Speaker 1: focus will be mainly when does that lead to people's
Speaker 1: feelings about the labor market changing? When do people feel
Speaker 1: a greater amount of job security. I'll be able to
Speaker 1: see that straight away in my real estate survey, because
Speaker 1: I asked the agents and they're right at the cold
Speaker 1: face and they'll see it. I'd'm thinking that there's sometime
Speaker 1: in the second half of this year and that will
Speaker 1: then I think flow through to the housing market putting
Speaker 1: in a better performance. But for the moment while, I've
Speaker 1: still got about a net fifty one percent of the
Speaker 1: agents saying all people are worried about their jobs or sorry,
Speaker 1: a gross fifty one percent. It's just going to keep
Speaker 1: a bit of a dampner on the housing market for
Speaker 1: the first half of this year.
Speaker 2: Thanks Tony for coming in and joining us in the
Speaker 2: studio today, and thanks everyone for joining in. You can
Speaker 2: watch Shared Lunch on YouTube or follow the podcast on
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Speaker 2: us what you'd like to hear next. Ma Taba