WEBVTT - Fix, float, or flip? Mortgage strategy 2025–Tony Alexander 0:00:00.120 --> 0:00:03.080 It's challenging. I think for the investors out there, the 0:00:03.120 --> 0:00:06.600 maintenance costs, the insurance costs in particular, and of course 0:00:06.640 --> 0:00:09.879 the council rates just bang bang bang. I certainly expect 0:00:09.920 --> 0:00:12.520 house prices to go up. I mean where they sit 0:00:12.640 --> 0:00:15.560 on average at the moment is basically exactly where they 0:00:15.560 --> 0:00:18.800 were four years ago, so early twenty twenty one, by 0:00:18.840 --> 0:00:21.720 our lookers. For the economy to improve, when does that 0:00:21.880 --> 0:00:25.759 lead to people's feelings about the labor market changing? When 0:00:25.800 --> 0:00:28.320 do people feel a greater amount of job security? 0:00:31.400 --> 0:00:34.360 Cura and Welcome to Shed Lunch, brought to you by Shehz's. 0:00:34.560 --> 0:00:37.920 I'm Helen Madison. Today on the program, we take a 0:00:37.960 --> 0:00:41.680 pulse check of the property market. Will more interest rate 0:00:41.800 --> 0:00:44.640 can'ts revive house prices that have been down more than 0:00:44.680 --> 0:00:48.519 twenty percent in some regions, or will investors and sellers 0:00:48.880 --> 0:00:52.959 be disappointed? Independent economist Tony Alexander has been mulling over 0:00:53.000 --> 0:00:56.440 the numbers and the sentiment before we dive in. Here's 0:00:56.440 --> 0:00:58.720 some important information for you to consider. 0:00:59.280 --> 0:01:02.280 Investing in risk you might lose the money you start with. 0:01:02.640 --> 0:01:06.360 We recommend talking to a licensed financial advisor. We also 0:01:06.440 --> 0:01:10.400 recommend reading product disclosure documents. Before deciding to invest. Everything 0:01:10.400 --> 0:01:12.480 you're about to see and hear is current at the 0:01:12.480 --> 0:01:13.280 time of recording. 0:01:13.560 --> 0:01:16.160 Welcome Tony. Great to see you in person in the 0:01:16.240 --> 0:01:17.600 studio for the first time. 0:01:17.920 --> 0:01:20.240 Yes, yes, now it's good to be here in person 0:01:20.360 --> 0:01:22.920 rather than just down the remote camera from Australia. 0:01:23.000 --> 0:01:27.440 Sometimes. That's right, let's get into it. Then, interest rates 0:01:27.600 --> 0:01:30.120 are on the downward cycles, and I know you've said 0:01:30.160 --> 0:01:33.440 before that you think the cuts that we're having will 0:01:33.480 --> 0:01:37.120 finish or bottom out mid twenty twenty five. Last week 0:01:37.160 --> 0:01:39.160 the Reserve Bank did what we thought it would do 0:01:39.360 --> 0:01:42.119 and they reduce rates by fifty basis points. So we're 0:01:42.160 --> 0:01:45.880 three point seventy five anything in that monetary policy statement 0:01:45.920 --> 0:01:49.000 which a company. That announcement has made you think differently 0:01:49.080 --> 0:01:50.360 from where the bottom might be. 0:01:51.560 --> 0:01:54.480 Well, previously I thought maybe three point five percent would 0:01:54.480 --> 0:01:56.520 be the bottom. But the Reserve Bank, first of all, 0:01:56.560 --> 0:01:59.640 they brought forward in time by about a year when 0:01:59.680 --> 0:02:03.240 they see monetary policy reaching its bottom, and the low 0:02:03.280 --> 0:02:06.000 point they've got there is either three or three point 0:02:06.000 --> 0:02:08.800 twenty five percent. In the document it says three point 0:02:08.840 --> 0:02:10.840 one percent. Well, we're not going to get three point 0:02:10.880 --> 0:02:12.920 one percent. It's going to be three or three point 0:02:12.960 --> 0:02:16.160 twenty five, and I think they've given a strong benefit 0:02:16.280 --> 0:02:19.600 of the doubt to the upturn they see in the 0:02:19.639 --> 0:02:23.960 economy not really driving much inflation. So maybe three point 0:02:23.960 --> 0:02:25.880 twenty five percent, I guess, is where I think we're 0:02:25.880 --> 0:02:28.040 going to see the bottom the for the official cash rate, 0:02:28.320 --> 0:02:30.519 and chances are that's going to be around near the 0:02:30.560 --> 0:02:30.960 middle of the. 0:02:31.000 --> 0:02:35.040 Year, so similar to what you saw before. What about 0:02:35.160 --> 0:02:37.560 house prices though, because this seems to be quite a 0:02:37.600 --> 0:02:40.680 bit of optimism out there that these this downward cycling 0:02:40.800 --> 0:02:43.520 rates will actually lift prices, which, as we know, have 0:02:43.600 --> 0:02:47.040 been down They've been twenty percent in some places. What's 0:02:47.080 --> 0:02:49.560 your view on where house prices are going, because you 0:02:49.560 --> 0:02:51.359 have seen one stage they could even go up. 0:02:51.639 --> 0:02:54.720 Yeah, yeah, well, I certainly expect house prices to go up. 0:02:54.880 --> 0:02:57.160 I mean where they sit on average at the moment 0:02:57.400 --> 0:03:00.440 is basically exactly where they were four year years ago, 0:03:00.520 --> 0:03:02.919 so early twenty twenty one, when we're already seeing a 0:03:02.960 --> 0:03:05.320 bit of a surge with the pandemic and very low 0:03:05.360 --> 0:03:10.120 interest rates and Alvir's gone et cetera. Just recently, when 0:03:10.160 --> 0:03:12.639 I look at the data from ARII and Z in particular, 0:03:12.840 --> 0:03:15.480 it seems to me they're not really going anywhere quite frankly. 0:03:15.919 --> 0:03:18.919 We saw a bit of a movement upward twenty twenty 0:03:18.919 --> 0:03:21.120 three with the first home buyers going into the market, 0:03:21.160 --> 0:03:23.680 and then that sort of faded away, and again in 0:03:23.720 --> 0:03:26.040 twenty twenty four. We saw a bit of a movement 0:03:26.120 --> 0:03:28.919 upwards around about the middle of the year July, August, 0:03:28.960 --> 0:03:31.800 et cetera, when talk a rows of interest rates going down, 0:03:32.080 --> 0:03:35.000 but that sort of faded a bit over summer as well. 0:03:35.080 --> 0:03:37.200 So for the moment, I'd say the market is flat, 0:03:37.440 --> 0:03:40.760 but I would expect, yes, interest rates going down, people 0:03:40.840 --> 0:03:42.840 rolling on to low interest rates for out a bit 0:03:42.880 --> 0:03:44.880 of cash. It's going to be I think when people 0:03:44.880 --> 0:03:47.680 have a bit more confidence about their jobs, the labor 0:03:47.720 --> 0:03:51.320 market improving, that's maybe more when it's reasonable to think 0:03:51.360 --> 0:03:54.080 about we're going to have a long string of small 0:03:54.120 --> 0:03:55.640 increases each month coming along. 0:03:57.280 --> 0:03:59.920 It does seem to be maybe anecdotally, a lot of 0:04:00.200 --> 0:04:03.160 listings out there at the moment, and I do wonder 0:04:03.200 --> 0:04:09.000 whether it's about sellers are readjusting their expectations when it 0:04:09.040 --> 0:04:11.520 comes to price, because it would appear that it's a 0:04:11.520 --> 0:04:15.120 bit of a buyer's market and that sellers really maybe 0:04:15.120 --> 0:04:17.480 can't get what they thought. They did. Look this week 0:04:17.520 --> 0:04:21.560 at Ryman Healthcare, the retirement operator that's listed, and that's 0:04:21.960 --> 0:04:25.560 going to raise another one billion dollars in capital. And 0:04:25.560 --> 0:04:27.080 one of the reasons they said they were doing that 0:04:27.240 --> 0:04:29.359 is that people that were thinking about coming into the 0:04:29.360 --> 0:04:31.880 retirement village hadn't been able to sell their houses at 0:04:31.920 --> 0:04:35.000 the price they liked, so they've deferred coming in. So 0:04:35.200 --> 0:04:38.000 Ryman's got extra stock that's empty. So yeah, I just 0:04:38.000 --> 0:04:39.520 wondered what your perspective on that was. 0:04:39.600 --> 0:04:41.200 Yeah, Well, if you look at the data from real 0:04:41.279 --> 0:04:44.119 estate dot co dot Nz, they have total listings sitting 0:04:44.160 --> 0:04:46.719 around about thirty two to thirty three thousand at the moment, 0:04:47.320 --> 0:04:50.440 that's up about eighteen one eight percent from a year ago. 0:04:50.880 --> 0:04:54.120 Compare that with under fourteen thousand in the middle of 0:04:54.160 --> 0:04:56.839 twenty twenty one, So it's quite a change from back then. 0:04:57.320 --> 0:05:00.240 And I guess what I'm perceiving in the housing market 0:05:00.279 --> 0:05:03.279 now is that there are more people willing to sell. 0:05:03.480 --> 0:05:05.960 That's what happened in twenty twenty three. The first buyers 0:05:05.960 --> 0:05:08.880 went into the market are the first home buyers. Then 0:05:09.000 --> 0:05:11.280 some of the investors moved into the market, and then 0:05:11.360 --> 0:05:13.760 a lot of investors sellers. They stepped into the market, 0:05:13.800 --> 0:05:16.400 and we saw a similar sort of thing last year, 0:05:16.800 --> 0:05:18.560 and so there are a number of people who want 0:05:18.600 --> 0:05:20.560 to sell, get on with their lives, et cetera. But 0:05:20.600 --> 0:05:24.080 it is definitely strongly a buyer's market. In my survey 0:05:24.160 --> 0:05:27.040 of real estate agents, I've got a net forty percent 0:05:27.120 --> 0:05:30.839 of them saying it's a buyer's market still. And when 0:05:30.839 --> 0:05:34.400 it comes to the vendors willing to capitulate too, many 0:05:34.440 --> 0:05:37.360 have memories of where the prices were, you know, two 0:05:37.440 --> 0:05:40.360 three years or so ago, So a lot of them 0:05:40.400 --> 0:05:42.560 still aren't willing to discount, you know, to meet the 0:05:42.600 --> 0:05:45.480 market and get on with their life, whether it be 0:05:45.480 --> 0:05:49.120 retirement or shifting, et cetera. So there could easily still 0:05:49.160 --> 0:05:51.159 be a little bit more downward price adjustment to the 0:05:51.200 --> 0:05:53.359 very near future, but I think it's more going to 0:05:53.400 --> 0:05:55.839 be the buyers coming back into the market later this 0:05:56.000 --> 0:05:59.280 year as the employment situation looks better. But certainly the 0:05:59.360 --> 0:06:00.600 vendors are out there. 0:06:01.279 --> 0:06:04.160 Where does that leave the investors then? I mean, perhaps 0:06:04.279 --> 0:06:07.920 because the prices are depressed, there's some not so much bargains, 0:06:07.920 --> 0:06:09.760 but there's some reasonable pickings. 0:06:10.279 --> 0:06:13.400 Yeah, it's challenging, I think for the investors out there 0:06:13.440 --> 0:06:16.080 because the cost of running a rental business is now 0:06:16.160 --> 0:06:20.080 so much more than before, the maintenance costs, the insurance 0:06:20.080 --> 0:06:23.080 cost in particular, and of course the council rates just 0:06:23.200 --> 0:06:26.400 bang bang bang, everyone around the country being told, well, 0:06:26.400 --> 0:06:28.040 this is what you're getting this year, Like in the 0:06:28.080 --> 0:06:29.760 Hut Valley there, I think lober Hunt it might have 0:06:29.800 --> 0:06:32.240 been fifteen percent they're getting this year, and plans are 0:06:32.240 --> 0:06:34.200 for the same next year, bang bang, you know for 0:06:34.240 --> 0:06:36.800 a few years after that. So that just changes the 0:06:36.880 --> 0:06:39.880 dynamic and the investors have to think, Okay, costs are 0:06:39.880 --> 0:06:43.159 going up, what is my ability to get extra rent 0:06:43.160 --> 0:06:46.440 coming through? Not good? At the moment. I've got about 0:06:46.440 --> 0:06:49.640 a net twenty one percent or so of landlords in 0:06:49.760 --> 0:06:52.480 a survey that I run saying it is very difficult 0:06:52.480 --> 0:06:55.040 to get a good tend the moment a year ago 0:06:55.160 --> 0:06:57.600 in net twenty percent was saying it's easy to get 0:06:57.600 --> 0:07:00.560 a good tenant. So for the investors, I know, I 0:07:00.600 --> 0:07:03.599 see some commentary out there people saying we see the 0:07:03.640 --> 0:07:06.520 investors coming back into the market as buyers. I think 0:07:06.560 --> 0:07:10.840 that flow is relatively small out there. The bigger change 0:07:10.960 --> 0:07:14.920 is the investors as sellers. So again in my survey 0:07:14.960 --> 0:07:18.840 of the property investors, I have about a net fourteen 0:07:19.000 --> 0:07:23.360 percent of the landlord saying they're looking to sell now. 0:07:23.400 --> 0:07:26.320 The last time that measure was positive, as in more 0:07:26.320 --> 0:07:29.200 looking to buy than sell, was about March of twenty 0:07:29.240 --> 0:07:32.200 twenty three, and the proportions saying they want to buy 0:07:32.640 --> 0:07:35.560 gross number it's unchanged about twenty one percent, So twenty 0:07:35.600 --> 0:07:37.560 one percent of the landlord saying yeah, I'd like to buy, 0:07:37.640 --> 0:07:39.480 same now as a year and a half or two 0:07:39.560 --> 0:07:42.440 years ago. What's changed is that back there early twenty 0:07:42.480 --> 0:07:45.840 twenty three, I only had about twenty percent saying I'm 0:07:45.840 --> 0:07:49.320 looking to sell. Now it's thirty five percent. So this 0:07:49.400 --> 0:07:52.160 is the change in the investor market in the past 0:07:52.160 --> 0:07:55.120 sor twelve to eighteen months. More in the of the 0:07:55.120 --> 0:07:58.280 investors are looking to sell. The numbers don't quite add 0:07:58.360 --> 0:08:01.280 up for them, and they're not expect acting rapid capital 0:08:01.320 --> 0:08:03.960 gain in the near future. So that to me is 0:08:04.000 --> 0:08:06.440 the main change out there, not necessarily any great change 0:08:06.440 --> 0:08:09.720 in investors buying. There's more investors looking to sell and 0:08:09.760 --> 0:08:11.240 maybe put the money somewhere. 0:08:10.920 --> 0:08:15.000 Else Tony, when you say investor money is probably going elsewhere, 0:08:15.040 --> 0:08:17.240 do we have any inkling on where that might be, 0:08:17.400 --> 0:08:20.400 is it listed property trust? Is it even commercial property, 0:08:20.440 --> 0:08:22.760 which I think has come back a little well. 0:08:22.760 --> 0:08:25.280 Certainly people have had a strong interest in commercial property 0:08:25.280 --> 0:08:27.640 for the past three to four years. With the residential 0:08:27.680 --> 0:08:31.440 market moving backwards, investors, when we're looking for something different, 0:08:31.440 --> 0:08:34.720 I'm having to learn about earthquake ratings, et cetera. Out there, 0:08:35.040 --> 0:08:37.880 there has actually been relatively good demand from tenants for 0:08:37.920 --> 0:08:41.840 commercial property, or more essentially in terms of upgrading. A 0:08:41.880 --> 0:08:44.400 lot of businesses. They need to boost their productivity, they 0:08:44.440 --> 0:08:46.760 need to look for cost savings, et cetera. So there's 0:08:46.800 --> 0:08:50.040 a lot of restructuring happening in the say the logistics side. 0:08:50.320 --> 0:08:52.720 The warehouse over there doesn't work any longer. You need 0:08:52.760 --> 0:08:55.120 a bigger one over there, meaning you can close two 0:08:55.200 --> 0:08:58.160 or the other warehouses. You want something maybe near one 0:08:58.160 --> 0:09:01.240 of the motorways, etc. There seems to be a lot 0:09:01.280 --> 0:09:04.280 of construction of new commercial buildings in that regard. The 0:09:04.360 --> 0:09:07.760 demand for office space has sort of shifted towards strong 0:09:07.800 --> 0:09:10.360 support for the prime stuff out there, not so much 0:09:10.360 --> 0:09:13.760 for the lower grades as yet. But yeah, that there's 0:09:13.760 --> 0:09:16.080 actually been strong interest for the commercial property I think 0:09:16.080 --> 0:09:18.640 for some time. I guess the relevant thing there is 0:09:18.679 --> 0:09:21.840 that when interstrates go down, the interest in commercial property 0:09:22.160 --> 0:09:25.840 goes up. My view is that interstrate's going down that 0:09:25.920 --> 0:09:29.560 are relevant to the commercial property investors three five ten 0:09:29.640 --> 0:09:32.439 year interst rates. We're probably just about near the end 0:09:32.520 --> 0:09:36.720 of those interrastrate falls, So I don't necessarily think commercial 0:09:36.720 --> 0:09:39.800 property demand is going to rise all that much over 0:09:39.840 --> 0:09:42.320 and above what you'd naturally expect with the economy starting 0:09:42.360 --> 0:09:43.560 to improve this year. 0:09:44.160 --> 0:09:46.920 If we look around the country, it does appear to 0:09:46.960 --> 0:09:48.720 be a bit of a mixed picture. If we think 0:09:48.760 --> 0:09:53.000 back to the residential property market, I think in your 0:09:53.040 --> 0:09:56.040 surveys of real estate agents that look like Northland was 0:09:56.080 --> 0:09:59.959 still a bit subdued. Auckland has a ton of listings. 0:10:01.080 --> 0:10:03.679 I think they have plenty was coming back but strongly. 0:10:03.960 --> 0:10:08.280 Harks Bay similar, Wellington still in the dulgrums. South Island 0:10:08.520 --> 0:10:11.560 a bit of a bright spot. What's your view on 0:10:12.080 --> 0:10:13.480 that picture? Yeah? 0:10:13.600 --> 0:10:17.760 Yeah, Regionally it is reasonably diverse. Christ Church, I think 0:10:17.760 --> 0:10:20.840 there's good economic support in terms of the tourist numbers. 0:10:20.840 --> 0:10:24.880 There's still recovery to happen there. Rejuvenation of the CBD 0:10:25.000 --> 0:10:27.840 will rebuilding of it, et cetera. The affordability of housing 0:10:27.880 --> 0:10:31.000 is a big positive as well. So I've long had 0:10:31.000 --> 0:10:34.400 a positive view on christ Church slash Canterbury, and when 0:10:34.400 --> 0:10:36.400 I say Canterbury, South Canterbury of course with a dairy 0:10:36.400 --> 0:10:38.400 payout being pretty strong, so that's going to be positive 0:10:38.440 --> 0:10:41.480 for Irashburton's tim marous et cetera. Or setting some of 0:10:41.520 --> 0:10:44.440 the freezing works are lost down in tomorrow. For instance, 0:10:45.080 --> 0:10:47.800 in Auckland Yere there's an oversupplied town houses and that's 0:10:47.840 --> 0:10:50.600 sort of dominating the market in people's thinking at the moment, 0:10:50.679 --> 0:10:54.319 especially out the west Auckland direction on northwest, and it's 0:10:54.360 --> 0:10:56.440 going to take a while for that to run through, 0:10:56.520 --> 0:10:59.560 and part of that running through is then there will 0:10:59.559 --> 0:11:03.880 be a further decrease in townhouse construction and it'll set 0:11:03.920 --> 0:11:06.640 the scene for maybe it's eighteen months from now, people 0:11:06.679 --> 0:11:09.760 will look around and go not too many spare townhouses, 0:11:10.000 --> 0:11:12.160 Maybe we need to build some more, and then there'll 0:11:12.160 --> 0:11:14.760 be a lag and building some more over twenty twenty six, 0:11:14.800 --> 0:11:16.960 So that cycle is going to be interesting for Auckland. 0:11:17.200 --> 0:11:19.360 A wee bit further out, christ Church maybe has a 0:11:19.360 --> 0:11:22.600 little bit of oversupply of some townhouses in the CBD, 0:11:22.800 --> 0:11:27.080 just a little bit there Wellington. People have to be careful. 0:11:27.120 --> 0:11:30.840 There's Wellington City and then lower Heart, Upper Hut Capity 0:11:30.880 --> 0:11:34.520 Coast and back towards Poiriuha. For Wellington City, there are 0:11:34.640 --> 0:11:38.800 challenges under Labors government. We saw the number of public 0:11:38.800 --> 0:11:41.640 servants go up about eighteen one eight thousand, and obviously 0:11:41.920 --> 0:11:43.840 a lot of them are losing their jobs. Now there's 0:11:43.840 --> 0:11:46.720 clearly going to be more restructuring, slash redundancies in the 0:11:46.720 --> 0:11:49.440 public service. The government has to address it. Seventeen billion 0:11:49.480 --> 0:11:52.199 dollar deficit. There's extra money going to have to clearly 0:11:52.240 --> 0:11:55.640 be able allocated for defense as well, and so that 0:11:55.760 --> 0:11:58.000 is going to keep Wellington depressed for I think you 0:11:58.200 --> 0:12:01.160 quite all of this year quite frankly, maybe into bit 0:12:01.160 --> 0:12:03.959 of twenty twenty six for the city, but not necessarily 0:12:03.960 --> 0:12:05.920 the same for the Hut Valley and up Capiti Coast. 0:12:06.000 --> 0:12:08.440 There's just so much development going to be happening up there, 0:12:08.720 --> 0:12:12.559 Transmission Gully Motorway in place, and of course the expressway 0:12:12.679 --> 0:12:16.440 getting extended to north of Livin as well. So have 0:12:16.480 --> 0:12:19.360 a positive view there. Why Kato Taranaki, they're going to 0:12:19.360 --> 0:12:23.400 benefit again from the dairy payout being relatively good. Not 0:12:23.480 --> 0:12:26.200 that I have any particularly divergent view on New Plymouth. 0:12:26.720 --> 0:12:28.800 It's just a good always a good solid underpinning there. 0:12:28.880 --> 0:12:32.200 Quite frankly, yeah, Toweronger may have to wait till there's 0:12:32.200 --> 0:12:35.480 a bit more strength in Auckland and then the user 0:12:35.520 --> 0:12:38.280 will sell your house in Auckland, get a good price, 0:12:38.920 --> 0:12:43.080 retire across to Toweronger. That engine will start a chugging 0:12:43.120 --> 0:12:45.640 away again. But it's not really doing it at the moment. 0:12:47.240 --> 0:12:50.000 Let's think about mortgage holders. I mean, I think at 0:12:50.080 --> 0:12:53.840 least half have fixed at quite short terms. So we're 0:12:53.840 --> 0:12:58.160 talking six months in one year. With rates nearly bottoming, 0:12:58.400 --> 0:13:00.920 people are probably thinking what do do and do you 0:13:00.920 --> 0:13:03.960 think we're going to see a change to those longer 0:13:04.040 --> 0:13:06.520 term rates. That said, this week there seems to be 0:13:06.520 --> 0:13:09.560 a bit of a war between ASP and Westpac that 0:13:09.679 --> 0:13:13.320 two year rate at four point ninety nine. What's your thoughts? 0:13:13.440 --> 0:13:15.560 Well, when west Pac for two weeks had three years 0:13:15.600 --> 0:13:17.560 at four point nine to nine, I jumped up and 0:13:17.559 --> 0:13:20.160 down and said now that is what I would take basically, 0:13:20.920 --> 0:13:23.000 and it didn't. The other banks didn't jump in. It 0:13:23.000 --> 0:13:24.920 didn't last, and so yeah, I see the competition is 0:13:24.920 --> 0:13:27.560 for the two year period. If I had a mortgage 0:13:28.040 --> 0:13:30.160 at the moment, and I was thinking I'll get a 0:13:30.200 --> 0:13:32.120 lot of it repaid in the next two years. I 0:13:32.160 --> 0:13:34.880 personally would probably take the two years at four point 0:13:35.000 --> 0:13:38.880 nine to nine percent. I see no great benefit any longer. Personally, 0:13:38.880 --> 0:13:43.080 it's sticking floating six months, twelve months. Those rates will 0:13:43.080 --> 0:13:45.439 come down a bit further. Do I think people need 0:13:45.480 --> 0:13:47.920 to hurry. I don't see the upward leg of the 0:13:47.960 --> 0:13:52.080 monetary policy cycles starting again until maybe late twenty six, 0:13:52.120 --> 0:13:55.200 maybe twenty twenty seven. But that's the next shift in 0:13:55.240 --> 0:13:57.600 the market. In terms of thinking about interest rates, it's 0:13:57.600 --> 0:13:59.280 all been monetary policy is easing. 0:13:59.280 --> 0:13:59.800 It's easing. 0:14:00.360 --> 0:14:02.640 Eventually it stops seizing. Oh, that's going to be later 0:14:02.679 --> 0:14:04.000 on this year, second half of this year. 0:14:04.080 --> 0:14:04.400 Okay. 0:14:04.880 --> 0:14:07.000 I wonder when it goes up back up again. The 0:14:07.040 --> 0:14:09.760 market's not really there yet. When that happens, you'll probably 0:14:09.760 --> 0:14:11.480 start to see them upward movement in the three to 0:14:11.520 --> 0:14:14.760 five year wholesale borrowing costs for the banks and those 0:14:14.800 --> 0:14:18.040 interrast rates rising. That might be a story for next year. 0:14:18.880 --> 0:14:21.480 Most people, being kiwis, are only going to fix for 0:14:21.520 --> 0:14:23.560 two years, three years. A few will jump in the 0:14:23.960 --> 0:14:25.600 even when the five year rate was at two point 0:14:25.680 --> 0:14:28.200 nine nine percent. Hardly anybody fix back then from twenty 0:14:28.280 --> 0:14:30.680 twenty to twenty twenty one. But most people are probably 0:14:30.720 --> 0:14:32.480 going to be reasonably happy in the two year period. 0:14:32.680 --> 0:14:35.640 And what's going to happen Take ourselves two years from now, 0:14:36.040 --> 0:14:38.640 so that's twenty twenty seven. Interest rates might be going 0:14:38.760 --> 0:14:41.640 up by then. So that's the difficulty. You fix two 0:14:41.720 --> 0:14:44.239 years at the moment because it seems to be pretty attractive. 0:14:44.960 --> 0:14:48.280 Your rate's going to mature right when there's upside risk 0:14:48.600 --> 0:14:50.560 on the interest rates coming forward, and then you're going 0:14:50.600 --> 0:14:52.240 to have a bit of a problem. So that's one 0:14:52.240 --> 0:14:54.960 reason I was such in favor of three years four 0:14:55.080 --> 0:14:58.000 ninety nine. Maybe it comes back again and again I'd 0:14:58.000 --> 0:15:00.160 probably say that's what I would personally go for. 0:15:00.800 --> 0:15:05.360 So a conundrum for people fixing longer or shorter. Yep, 0:15:05.680 --> 0:15:07.280 it's almost like timing the market. 0:15:08.640 --> 0:15:11.920 Sometimes something sticks out and you say, well, I don't 0:15:11.920 --> 0:15:13.320 really have a view on where rates are going to 0:15:13.320 --> 0:15:15.840 go in the near future, but this one seems screen's 0:15:15.880 --> 0:15:17.720 quite good. And that was the two ninety nine to 0:15:17.720 --> 0:15:20.160 five year one from twenty twenty twenty one, and I think, 0:15:20.200 --> 0:15:22.800 like I say, close to five percent were just under 0:15:22.840 --> 0:15:25.400 for three years I mean, if there was a four 0:15:25.480 --> 0:15:28.120 or five year rate, I'd probably take that at four 0:15:28.120 --> 0:15:29.760 point nine nine percent. If one of the banks was 0:15:29.800 --> 0:15:32.640 going to offer that, they probably won't because the competition 0:15:33.280 --> 0:15:35.200 where people are looking is more in the two year 0:15:35.240 --> 0:15:35.680 time frame. 0:15:35.760 --> 0:15:38.400 Quite frank, Yeah, and that's hence why I think ASP 0:15:38.520 --> 0:15:40.800 and Wespeck have done what they had And also that 0:15:40.800 --> 0:15:42.840 seems to be one of the few moves. Most of 0:15:42.880 --> 0:15:47.280 the rate moves since the OCR last week is floating. 0:15:48.000 --> 0:15:50.920 Yeah, well, floating is really closely tied to the cash rate. 0:15:51.040 --> 0:15:54.080 It goes up, goes up, it goes down. The float 0:15:54.080 --> 0:15:56.320 at the more rate will come down. The one year 0:15:56.400 --> 0:15:58.920 fixed rates will also tend to move, but once you 0:15:58.960 --> 0:16:02.200 get out further along the year curve, this reflects expectations 0:16:02.240 --> 0:16:04.240 of where the market is going to go. And the 0:16:04.280 --> 0:16:06.880 reason we haven't seen like fresh cuts in three, four 0:16:06.920 --> 0:16:09.280 or five year mortgage rates is because the markets had 0:16:09.320 --> 0:16:12.280 already factored in that the low point for the cash 0:16:12.360 --> 0:16:14.720 rate isn't going to be twenty twenty six or twenty seven, 0:16:14.880 --> 0:16:16.360 it's going to be the end of this year. So 0:16:16.400 --> 0:16:19.960 the Reserve Bank merely validated what the market had already moved. 0:16:19.960 --> 0:16:22.160 Towards and that's why most of us are now thinking 0:16:22.400 --> 0:16:24.680 we are probably at the low point in the cycle 0:16:24.760 --> 0:16:27.520 for three, four or five year fixed rates, bank borrowing costs, 0:16:27.680 --> 0:16:30.160 and the mortgage rates. Two years there could be a 0:16:30.200 --> 0:16:32.280 little bit more downside, but I really think it's going 0:16:32.320 --> 0:16:34.200 to be pretty limited from here. 0:16:34.240 --> 0:16:37.160 With those longer term rates too. Isn't that what the 0:16:37.320 --> 0:16:41.600 geopolitical kind of world economy and the effects that it has. 0:16:42.040 --> 0:16:44.920 Isn't that more something that affects those rates and those 0:16:44.920 --> 0:16:45.600 shorter term right? 0:16:45.760 --> 0:16:48.120 Yeah, most definitely. If there's a big shock out there, 0:16:48.120 --> 0:16:50.400 then the Reserve Bank will respond one way or another. 0:16:50.520 --> 0:16:52.960 Are to that, And of course they expressed a lot 0:16:53.000 --> 0:16:55.480 of uncertainty in their monetary policy statement about what's going 0:16:55.520 --> 0:16:58.200 to happen in the world economy, because well, duh, none 0:16:58.200 --> 0:17:00.640 of us know exactly what is going to happen. You 0:17:00.680 --> 0:17:04.119 think to yourself, Okay, if tariffs go up, there's more inflation. Oh, 0:17:04.240 --> 0:17:07.400 interstrates will be higher. But if tariffs go up, maybe 0:17:07.400 --> 0:17:10.680 that depresses world growth. Oh that means less inflation, That 0:17:10.720 --> 0:17:13.480 means interstrates go down. You just got to take it 0:17:13.520 --> 0:17:15.760 as it comes, quite frankly, See what's going to develop 0:17:15.800 --> 0:17:17.600 out of all of this. So there is a lot 0:17:17.600 --> 0:17:21.880 of uncertainty for the whole interrastrate structure still out there. 0:17:22.000 --> 0:17:24.080 If we're looking ahead it where interstrates are likely to 0:17:24.119 --> 0:17:26.199 go in the very near future. I certainly think it's 0:17:26.240 --> 0:17:29.080 reasonable to expect that come the next review April. I 0:17:29.080 --> 0:17:32.000 think it's early April, they will cut by I think 0:17:32.040 --> 0:17:35.320 not half but quarter of a percent, and then there's 0:17:35.359 --> 0:17:38.360 probably one more after that, So whatever that is six 0:17:38.640 --> 0:17:41.840 or eight weeks after early April. I guess where I 0:17:41.920 --> 0:17:44.520 differ from many others is that I don't think they'll 0:17:44.520 --> 0:17:46.680 take it down to three percent. I think they'll get 0:17:46.720 --> 0:17:49.520 to the three point twenty five percent and pretty much 0:17:49.560 --> 0:17:52.439 say that's probably going to be it. But again, the 0:17:52.520 --> 0:17:55.320 uncertainty out there in the world we're living in a 0:17:55.359 --> 0:17:59.840 Trumpian politics, economics, international environment. We've just got to hang 0:17:59.920 --> 0:18:02.000 on for the ride. Quite frankly, let's. 0:18:01.920 --> 0:18:05.120 Jump back to construction and consense. That's usually a bit 0:18:05.119 --> 0:18:07.119 of a litmus test as to how things are going. 0:18:07.680 --> 0:18:11.280 I do note that renovations seem to be back in vogue. 0:18:11.680 --> 0:18:12.960 Can you tell us a bit about that. 0:18:13.200 --> 0:18:16.640 Yeah, that's interesting that in my Monthly Spending Plans survey 0:18:18.240 --> 0:18:20.000 one of the I think there's only two areas which 0:18:20.040 --> 0:18:22.480 have shown much of a change recently. One is a 0:18:22.520 --> 0:18:24.480 few more people are thinking about buying a house to 0:18:24.560 --> 0:18:26.879 live in themselves. I think that's the first home buyers 0:18:27.160 --> 0:18:30.040 still looking to take advantage of the opportunity out there 0:18:30.040 --> 0:18:33.359 with not much competition from investors. And the other one 0:18:33.520 --> 0:18:35.920 is that things are still relatively depressed and terms of 0:18:35.920 --> 0:18:38.879 people saying I'm going to buy a motor vehicle or appliance. 0:18:39.119 --> 0:18:41.440 But for the home renovations, there's definitely a strong upward 0:18:41.480 --> 0:18:43.800 trend which has gone through there, and maybe for some 0:18:43.960 --> 0:18:47.000 people it's a feeling of there's a few more tradees 0:18:47.040 --> 0:18:49.880 out there now because house building is falling away. There's 0:18:49.920 --> 0:18:53.040 a few more people offering their services electrical plumbing and 0:18:53.119 --> 0:18:55.800 a carpentry, et cetera. So there's an opportunity maybe to 0:18:55.840 --> 0:18:58.240 get some of that work done without having to pay 0:18:58.240 --> 0:19:01.240 an absolute arm and a leg in order to get 0:19:01.240 --> 0:19:03.399 it completed and run the job. The risk of the 0:19:03.480 --> 0:19:04.960 job's not going to be done, you know, for quite 0:19:04.960 --> 0:19:06.520 some time if they shoult off to something that's going 0:19:06.560 --> 0:19:09.440 to pay better in the near term. So I think 0:19:09.440 --> 0:19:12.440 it's that it's also the case, I think that there's 0:19:12.440 --> 0:19:15.520 always the older generation out there looking to improve things, 0:19:15.520 --> 0:19:18.800