WEBVTT - With interest rates down, will property bounce back? 0:00:06.000 --> 0:00:08.920 Curder and welcome to Shared Lunch. My name's Laighton Roberts. 0:00:08.960 --> 0:00:11.559 I'm the co CEO and co founder here at Chasis. 0:00:12.240 --> 0:00:15.240 On the program today, we're talking about everyone's favorite topic, 0:00:15.480 --> 0:00:18.599 interest rates and the property market. This is ahead of 0:00:18.640 --> 0:00:21.319 the Reserve Bank meeting to decide if the official cash 0:00:21.360 --> 0:00:24.120 rate will be cut again, and of course this dictates 0:00:24.120 --> 0:00:26.280 what we will all pay on our mortgages for our loans. 0:00:26.840 --> 0:00:30.960 To chew this over, I'm joined by independent economists Tony Alexander. 0:00:31.200 --> 0:00:33.720 But before we get started, here's some important information. 0:00:33.880 --> 0:00:36.440 Investing involves the risk you might lose the money you 0:00:36.479 --> 0:00:39.760 start with. We recommend talking to a licensed financial advisor. 0:00:40.479 --> 0:00:44.320 We also recommend reading product disclosure documents before deciding to invest. 0:00:44.560 --> 0:00:45.599 Everything you're about. 0:00:45.400 --> 0:00:47.880 To see and here is current at the time of recording. 0:00:48.040 --> 0:00:50.280 Hey, welcome, Tony. Thanks so much for joining us again. 0:00:50.720 --> 0:00:52.239 You have no trouble laden good to be here. 0:00:52.240 --> 0:00:54.520 He Oh, look, Tony, it's great to have you here. 0:00:54.680 --> 0:00:56.800 Very topical timing, I mean always is to have you here. 0:00:56.960 --> 0:00:59.160 And everyone loves talking about interestrates and property market in 0:00:59.200 --> 0:01:01.880 New Zealand, but specifically with some big changes in the 0:01:01.880 --> 0:01:04.240 central banks here and overseas and the last little bit. 0:01:04.280 --> 0:01:06.520 This one's going to be interesting, so I think let's 0:01:06.600 --> 0:01:08.560 get straight into it. How's it shaping up for the 0:01:08.640 --> 0:01:10.119 Reserve Bank announcement coming up? 0:01:10.840 --> 0:01:14.360 Yes, well, for that next announcement our next week Wednesday, 0:01:14.680 --> 0:01:16.760 it is likely we're going to see the official cash 0:01:16.880 --> 0:01:19.640 rate cut again. It would be pretty rare for the 0:01:19.680 --> 0:01:23.000 Reserve Bank to cut by zero point twenty five percent 0:01:23.200 --> 0:01:25.520 of the start of an easing cycle and then just 0:01:25.600 --> 0:01:27.880 take a pause. If they're going to take a pause 0:01:27.920 --> 0:01:30.600 and see how things pan out, maybe after they've taken 0:01:30.600 --> 0:01:32.640 the rate down by one percent in a few months 0:01:32.720 --> 0:01:36.360 time or so. My interest is mainly, of course, in 0:01:36.440 --> 0:01:38.920 not whether it's going to cut or not, but will 0:01:38.920 --> 0:01:41.920 it be point two five or zero point five percent? 0:01:42.120 --> 0:01:44.199 And I know a lot of people are thinking, well, 0:01:44.360 --> 0:01:48.440 because the Americans, the Federal Reserve just started their easing 0:01:48.520 --> 0:01:51.280 cycle and went for a big bang zero point five 0:01:51.320 --> 0:01:53.880 percent cut, maybe the Reserve Bank in New Zealand has 0:01:53.880 --> 0:01:55.560 some catching up to do as well, and they'll go 0:01:55.680 --> 0:01:58.800 zero point five percent. Now they might, but I can't 0:01:58.840 --> 0:02:02.200 help think that they'll still decide to plod it along 0:02:02.240 --> 0:02:05.280 at point two five for maybe another two or three 0:02:05.280 --> 0:02:07.800 times and then like I say, pause and decide if 0:02:07.840 --> 0:02:09.840 they need to do a bit more of a rapid move. 0:02:09.960 --> 0:02:11.480 So yeah, lower rates are coming. 0:02:12.400 --> 0:02:15.680 Yeah, No, I'm with you, and I also I mean 0:02:15.760 --> 0:02:17.880 my personal feeling is I think they should go fifty, 0:02:17.919 --> 0:02:21.480 but I don't know that's very much based on probably 0:02:21.480 --> 0:02:24.239 personal data. So interested in your view. What are the 0:02:24.720 --> 0:02:27.640 more macro pieces of data at the moment that mean 0:02:27.720 --> 0:02:29.200 that it looks like they're going to hit that twenty 0:02:29.200 --> 0:02:30.320 five as a post of the fifty. 0:02:31.240 --> 0:02:34.280 Yes, yeah, Well, if we look at things like consumer confidence, 0:02:34.639 --> 0:02:37.280 we can see that that has improved, but it's still 0:02:37.320 --> 0:02:41.960 firmly negative. My own Monthly Spending Plans survey two and 0:02:41.960 --> 0:02:44.200 a half, almost three months ago, I had a net 0:02:44.360 --> 0:02:46.440 forty two percent of people saying they were going to 0:02:46.520 --> 0:02:50.079 cut back on their spending, so terrible news for retailers. Now, 0:02:50.120 --> 0:02:52.960 with interest rates going down, it's improved, but it's still 0:02:53.080 --> 0:02:56.400 minus thirteen percent, and the A and Z Roy Morgan 0:02:56.840 --> 0:03:00.359 survey had a similar sort of movement improving. It's still 0:03:00.440 --> 0:03:03.440 firmly negative. So the Central Bank will look at that 0:03:03.639 --> 0:03:06.680 and think, okay, consumer spending makes up about sixty five 0:03:06.720 --> 0:03:09.760 percent of economic activity, and if people are still saying 0:03:09.760 --> 0:03:12.680 they're going to be cutting back, bad for retailers, bad 0:03:12.680 --> 0:03:17.760 for the economy overall, therefore probably inflation going down. However, 0:03:18.160 --> 0:03:20.760 there's something I've been talking about for quite some time now, 0:03:20.800 --> 0:03:25.440 and that's the pricing intentions of people in the business sector, 0:03:25.800 --> 0:03:29.080 and these had not yet been crushed. So the A 0:03:29.240 --> 0:03:31.840 and Z and their monthly business outlooks serve they actually 0:03:31.840 --> 0:03:34.120 have a measure of this week and track on a 0:03:34.160 --> 0:03:37.200 monthly basis, and we go back about three months ago, 0:03:37.760 --> 0:03:40.840 they had a net thirty five percent of businesses saying 0:03:41.080 --> 0:03:43.320 they were still going to increase their prices over the 0:03:43.360 --> 0:03:46.560 next twelve months, which is well above average. It's gone 0:03:46.640 --> 0:03:49.520 up to a net forty two percent of businesses planning 0:03:49.520 --> 0:03:52.240 to increase their prices. So you know, things are not 0:03:52.280 --> 0:03:54.880 necessarily bucketing off with the inflation as much as the 0:03:54.920 --> 0:03:57.960 Reserve Bank would like. And that is why I'm not 0:03:58.040 --> 0:04:00.200 convinced it's going to be a half percent move from 0:04:00.240 --> 0:04:03.000 the very near future. They may just still want to 0:04:03.080 --> 0:04:04.120 take it cautiously. 0:04:04.400 --> 0:04:07.040 Initially, yeah, because of course you have intent, but you 0:04:07.040 --> 0:04:10.200 also need the market to support that, right, So you 0:04:10.200 --> 0:04:12.160 can put your prices up as much as you like. 0:04:12.200 --> 0:04:15.200 But people stop buying it because of it, And obviously 0:04:15.240 --> 0:04:16.640 there's some things that we're just going to have to buy. 0:04:16.760 --> 0:04:19.080 But is there any data there to say how much 0:04:19.080 --> 0:04:22.440 capacity the market can really support still, because from where 0:04:22.440 --> 0:04:24.160 I'm sitting and hearing like it still seems like a 0:04:24.160 --> 0:04:25.000 lot of pain out there. 0:04:25.760 --> 0:04:27.960 Definitely, I think a lot of pain out there. Businesses 0:04:28.040 --> 0:04:31.520 generally have got cash flow problems and that's causing what 0:04:32.040 --> 0:04:34.560 I predicted about eighteen months ago would be a weeding 0:04:34.640 --> 0:04:38.600 out process across all business sectors this year. As the 0:04:38.640 --> 0:04:41.600 cash flows tighten up, customers aren't buying as much, the 0:04:41.640 --> 0:04:46.880 ird is chasing up on tax obligations. Savings buffers that 0:04:46.920 --> 0:04:49.720 were built up during the pandemic have been used up 0:04:50.080 --> 0:04:53.440 as well, and so that means for businesses they definitely 0:04:53.440 --> 0:04:56.440 would like to increase their prices out there, because for 0:04:56.520 --> 0:04:59.480 most of them, the costs are still going up. And 0:04:59.520 --> 0:05:01.880 this is why in my many talks, I've been noting 0:05:01.880 --> 0:05:05.000 to people that at some stage, like around about now 0:05:05.240 --> 0:05:07.520 eighteen to twenty four months down the track from the 0:05:07.960 --> 0:05:10.920 real tightening of monetary policy in November twenty twenty two, 0:05:11.200 --> 0:05:13.680 this is when you've got the greatest pressure on businesses 0:05:13.720 --> 0:05:16.160 on the cash flows, and this is when the businesses 0:05:16.200 --> 0:05:18.719 will be having meetings and saying, well, our costs have 0:05:18.880 --> 0:05:21.560 just gone up another eight percent. We've got to increase 0:05:21.560 --> 0:05:24.200 our price is eight percent. It's worked before, so let's 0:05:24.240 --> 0:05:27.000 keep doing that. But then the marketing manager is going 0:05:27.040 --> 0:05:29.280 to jump up and say we can't do that because 0:05:29.320 --> 0:05:32.800 the customers are already shopping more and more online. They're 0:05:32.800 --> 0:05:35.720 pulling back on what they're buying. Generally, we've got unsold 0:05:35.760 --> 0:05:38.400 goods building up in the warehouses. We're not going to 0:05:38.440 --> 0:05:41.159 get away with an eight percent increase, maybe two percent 0:05:41.600 --> 0:05:44.880 if we are lucky. And that's the environment we are 0:05:44.880 --> 0:05:48.200 in for the economy right at the moment. And that's 0:05:48.240 --> 0:05:51.000 why I wouldn't have cut the official cash rate back 0:05:51.040 --> 0:05:54.039 in the middle of August. I'd have kept the throat 0:05:54.080 --> 0:05:56.560 on the foot, on the throat of businesses just a 0:05:56.600 --> 0:06:00.880 bit longer to really get away those positive price intentions 0:06:01.200 --> 0:06:03.360 for businesses. Of course, I mean, you might have your 0:06:03.400 --> 0:06:06.080 cost go up eight percent and you can't increase your prices. 0:06:06.520 --> 0:06:08.560 Then you've got to make some hard decisions. You've got 0:06:08.600 --> 0:06:10.880 to start laying people off, you've got to cut back 0:06:10.920 --> 0:06:17.520 to only your most profitable products. Processes, people locations. That's 0:06:17.560 --> 0:06:20.120 the disturbed part of the economy that we are in 0:06:20.240 --> 0:06:22.000 at the moment, and it says to me a lot 0:06:22.000 --> 0:06:24.000 of the economic indicators are still going to be fairly 0:06:24.040 --> 0:06:26.400 poor for the rest of this year through to maybe 0:06:26.440 --> 0:06:28.839 the middle of next year, and then I expect a 0:06:28.880 --> 0:06:30.680 more solid upturn in the economy. 0:06:31.400 --> 0:06:31.640 Yeah. 0:06:31.760 --> 0:06:34.760 Interesting, just for my own interests, is here much in 0:06:34.800 --> 0:06:37.839 the way of seasonality data point of one this weekend 0:06:37.920 --> 0:06:41.360 was absolutely humming and Wellington admittedly it had waw had 0:06:41.800 --> 0:06:43.640 at All Blacks tests, but it also had some good 0:06:43.680 --> 0:06:46.160 weather and it just seemed like there's more activity out 0:06:47.040 --> 0:06:49.080 in town. I'm just INSI how that might flow through 0:06:49.080 --> 0:06:49.599 into summer. 0:06:50.600 --> 0:06:53.279 Yeah, I'd be pretty cautious about summer. I think people's 0:06:53.279 --> 0:06:55.680 behavior is changing quite a bit out there. Hey and 0:06:55.720 --> 0:06:58.000 all Blacks test on. Yeah, clearly a lot of people 0:06:58.000 --> 0:06:59.440 are going to be showing up. They may have put 0:06:59.520 --> 0:07:02.160 money aside from other things and decide that's where we're 0:07:02.160 --> 0:07:04.000 going to have a blowout. We're going to watch the game, 0:07:04.040 --> 0:07:05.280 and then if we're going to go to a bar 0:07:05.480 --> 0:07:08.599 or a restaurant afterwards or before, et cetera. But we 0:07:08.640 --> 0:07:12.880 saw data out recently showing that spending and takeaways has 0:07:13.000 --> 0:07:16.000 gone up. And my own experience of going to cafes 0:07:16.040 --> 0:07:19.040 these days is I'm paying prices I used to pay, 0:07:19.480 --> 0:07:21.800 like I'm thinking only three or four years back going 0:07:21.840 --> 0:07:24.400 to a restaurant, and I'm thinking to myself, well, maybe 0:07:24.440 --> 0:07:25.920 if we are going to go out and have something 0:07:25.920 --> 0:07:27.800 to eat, frankly, it would be cheaper just to go 0:07:27.880 --> 0:07:30.680 to McDonald's any other sort of takeaways like that, and 0:07:30.720 --> 0:07:33.400 maybe the fish and chip shop rather than paying fifteen 0:07:33.440 --> 0:07:37.240 dollars for a little felo pastry, mushroom and chicken roll 0:07:37.320 --> 0:07:40.720 out there. I'd walk at doing that. People are changing 0:07:40.800 --> 0:07:43.680 the way they spend money and so you might still 0:07:43.720 --> 0:07:47.000 get people out and about, but they won't necessarily be 0:07:47.080 --> 0:07:51.280 spending as much in the retail the hospitality outlets as before. 0:07:51.520 --> 0:07:53.920 And yet when the weather's good, you've got to get 0:07:53.960 --> 0:07:57.080 out in Wellington because you know what's just around the corner. 0:07:57.200 --> 0:07:59.160 It's going to revert to normal fairly quickly. 0:08:01.400 --> 0:08:03.560 Let us talk a little bit about unemployment. You touched 0:08:03.600 --> 0:08:06.120 on you know some actions that business need to take 0:08:06.160 --> 0:08:07.960 in a weeding out process that's happening in the moment, 0:08:07.960 --> 0:08:09.680 But what's that training like at the moment. 0:08:10.480 --> 0:08:13.480 Yeah, we've already seen the unemployment rate rise from an 0:08:13.600 --> 0:08:17.040 unsustainably low three point two percent a couple of years 0:08:17.040 --> 0:08:20.360 ago to four point six percent, and it's likely that 0:08:20.440 --> 0:08:23.160 the unemployment rate will keep rising towards five and a 0:08:23.240 --> 0:08:25.640 half percent, sort of best estimate for most of us 0:08:26.120 --> 0:08:30.040 out there, And that principally is because we're seeing businesses, 0:08:30.160 --> 0:08:33.200 as I say, across all sectors, not just you know, 0:08:33.280 --> 0:08:36.760 house building is falling away and so you're getting unemployed carpenters, 0:08:36.760 --> 0:08:40.480 et cetera. Across all sectors. Businesses are having to sort 0:08:40.520 --> 0:08:44.480 of trimly at their sales there, find cost savings, change 0:08:44.520 --> 0:08:46.720 what they do and how they do it. And as 0:08:46.760 --> 0:08:50.480 we go through that, prices meaning businesses can handle costs 0:08:50.480 --> 0:08:52.840 still rising and not have to put their prices up 0:08:52.960 --> 0:08:55.480 up On the other side, yet the unemployment rate is 0:08:55.520 --> 0:08:58.400 going to go up. And what interests me here is 0:08:58.440 --> 0:09:01.760 that for younger people out there who let's say even 0:09:01.840 --> 0:09:04.280 join the workforce, took your first job ten years ago, 0:09:04.800 --> 0:09:07.840 this is a totally new thing because all you would 0:09:07.880 --> 0:09:12.040 have known to date will have been a generous employment environment. 0:09:12.320 --> 0:09:15.520 The unemployment rate was four percent going into the pandemic. 0:09:15.920 --> 0:09:17.920 There were predictions that would go through the roof, and 0:09:17.960 --> 0:09:20.240 that was pretty concerning. Well, it only briefly went to 0:09:20.280 --> 0:09:22.720 five point three percent, and then voom, with all the 0:09:22.760 --> 0:09:24.719 money thrown around the end of the economy, weent to 0:09:24.760 --> 0:09:27.839 three point two percent. Now we have a more sustained, 0:09:28.000 --> 0:09:31.760 cyclically normal increase in unemployment and a lot of people 0:09:31.880 --> 0:09:35.280 have not seen this before. So job security has gone 0:09:35.360 --> 0:09:38.760 down out there, and I think that especially is hitting 0:09:38.800 --> 0:09:43.120 into the willingness to spend make big decisions of younger 0:09:43.160 --> 0:09:46.760 people as opposed to older people, middle aged baby boomers, 0:09:46.760 --> 0:09:49.240 et cetera, who've seen a lot worse in the past. 0:09:49.360 --> 0:09:53.040 Unemployment rates around eleven percent or so and not quite 0:09:53.040 --> 0:09:56.960 so negatively affected by that particular dynamic, but certainly for 0:09:57.080 --> 0:10:00.880 younger people, this job in security is likely to be 0:10:00.960 --> 0:10:05.360 around until late twenty five more probably twenty twenty six, 0:10:05.559 --> 0:10:07.960 and there'll be a cap on some of their willingness 0:10:07.960 --> 0:10:08.720 to spend out there. 0:10:09.000 --> 0:10:12.840 Yeah. That's a pretty grim listening, isn't it. But it's 0:10:12.840 --> 0:10:16.679 super interesting from a you know, someone who owns and 0:10:16.760 --> 0:10:19.280 run runs businesses as well. It's my first time through 0:10:19.280 --> 0:10:22.400 this sort of cycle two thousand and eight, which I 0:10:22.400 --> 0:10:25.760 guess was the last major sort of economic crisis. I 0:10:25.920 --> 0:10:28.480 was in the army and pretty much oblivious, which still 0:10:28.480 --> 0:10:30.880 fascinates me given how interested and finance and money I was, 0:10:30.960 --> 0:10:33.719 but really learned about that when I started university in 0:10:34.200 --> 0:10:37.360 nine twenty ten, but haven't actually experienced the cycle play 0:10:37.400 --> 0:10:41.640 out and how different things can turn so quickly. But 0:10:42.280 --> 0:10:43.840 on the other side of that, it gives me optimism 0:10:43.960 --> 0:10:46.000 they can turn the other way recently quick and maybe 0:10:46.000 --> 0:10:47.680 we'll talk about some of the things that could drive 0:10:47.720 --> 0:10:51.120 that soon, but let's just keep hitting with the key 0:10:51.160 --> 0:10:55.960 macro numbers at the moment. Got migration, where's that at 0:10:56.000 --> 0:10:57.640 the moment, and what sort of impacts that having, and 0:10:58.120 --> 0:11:00.640 any views on the brain drain that we're a lot about. 0:11:00.840 --> 0:11:04.120 Okay, first point to note about migration. If it rarely 0:11:04.240 --> 0:11:08.400 drove the economy as much as people have traditionally thought, 0:11:08.679 --> 0:11:11.840 then we wouldn't have had a recession lasting almost two 0:11:11.920 --> 0:11:14.920 years because the net migration gain and it boomed from 0:11:14.920 --> 0:11:17.720 about eighteen twenty four months ago. We had a record 0:11:17.800 --> 0:11:20.000 net gain in the year to October last year of 0:11:20.040 --> 0:11:23.280 one hundred and thirty seven thousand people net. So that's 0:11:23.320 --> 0:11:26.520 those coming in lest those going out. There's one hundred 0:11:26.520 --> 0:11:29.560 and thirty seven thousand in there. That's a strong boost 0:11:29.640 --> 0:11:32.520 to the population. In fact, our population has grown about 0:11:32.520 --> 0:11:35.040 two point one percent in the past year, and four 0:11:35.080 --> 0:11:37.440 point four percent from where we were three years ago, 0:11:37.600 --> 0:11:40.679 So lots of people slashing around, and yet still our 0:11:40.720 --> 0:11:44.760 economy has been phenomenally weak. Now the net migration numbers 0:11:44.760 --> 0:11:48.240 are falling away relatively strongly, and in the year too. August. 0:11:48.320 --> 0:11:50.280 I think we're up to for the data there August 0:11:50.360 --> 0:11:53.960 or July, it's a net gain of about sixty seven thousand, 0:11:54.040 --> 0:11:56.800 but we're heading down to something who knows, maybe around 0:11:56.800 --> 0:11:59.480 twenty thousand as a net gain or so. And I 0:11:59.480 --> 0:12:03.400 can already see the impact in the rental market if 0:12:03.440 --> 0:12:05.880 we go back are we weighs a year year and 0:12:05.880 --> 0:12:08.200 a half ago, I had the likes of a net 0:12:08.360 --> 0:12:12.000 twenty four percent of landlords and one of my surveys 0:12:12.040 --> 0:12:15.160 saying it was easy to find good tenants, lots of 0:12:15.160 --> 0:12:17.760 people sloshing around in the middle of twenty twenty three. 0:12:18.160 --> 0:12:20.960 Now I have a record net twenty two percent of 0:12:21.040 --> 0:12:24.600 landlords saying it is hard to get a good tenant. 0:12:24.880 --> 0:12:28.280 So that rental market is actually shifted on a dime. 0:12:28.880 --> 0:12:32.120 One thing Contributing to that has been some developers who 0:12:32.120 --> 0:12:35.000 have not been able to sell the let's say townhouses 0:12:35.080 --> 0:12:37.320 up in Auckland in particular. They've put them into the 0:12:37.360 --> 0:12:40.560 rental market for a while, waiting for the housing market 0:12:40.559 --> 0:12:42.280 to pick up, and then they'll go and sell them 0:12:42.640 --> 0:12:46.400 to end buyers. But migration has an impact, certainly in 0:12:46.440 --> 0:12:49.160 the rental market, but for the overall economy, it's not 0:12:49.240 --> 0:12:52.040 the big driving force necessarily that people would be thinking. 0:12:52.080 --> 0:12:55.400 And so as we look now towards a week net 0:12:55.440 --> 0:12:58.960 migration period and more of a focus on Kiwis going 0:12:59.000 --> 0:13:03.280 to Australia particular, it doesn't leave me aggressively depressed about 0:13:03.320 --> 0:13:07.640 the economy. It will be some restraint, for sure. It'll 0:13:07.640 --> 0:13:10.160 be something that people will focus on, but it won't 0:13:10.160 --> 0:13:15.080 stop the economy's pace of growth from turning positive, accelerating 0:13:15.120 --> 0:13:17.800 through twenty twenty five, twenty six, and probably twenty twenty 0:13:17.800 --> 0:13:20.760 seven as well, because there's a lot of other factors 0:13:20.920 --> 0:13:25.319 in play. Increased infrastructure activity out there, probably more foreign 0:13:25.400 --> 0:13:29.000 students coming into New Zealand as well, the real estate 0:13:29.080 --> 0:13:32.160 activity picking up, and eventually that will lead to house 0:13:32.200 --> 0:13:35.840 building picking up in twenty twenty six, not twenty twenty five. 0:13:36.440 --> 0:13:40.240 But yeah, migration numbers turning around reasonably quickly at the moment. 0:13:40.960 --> 0:13:42.880 Yeah, just if you have them off the top of 0:13:42.920 --> 0:13:44.760 your head. But how's that net number being made up 0:13:44.760 --> 0:13:46.520 at the moment? Is the is the sort of the 0:13:46.600 --> 0:13:51.400 number coming in and the is the number going out 0:13:51.600 --> 0:13:53.480 being more impactful or is it the number coming in 0:13:53.600 --> 0:13:56.040 is dropping off? Like what's making up that net number? 0:13:56.400 --> 0:14:00.000 Yeah, the two numbers tend to move together to work 0:14:00.160 --> 0:14:02.960 in the situation. So we do have a few more 0:14:03.000 --> 0:14:06.720 people that are leaving the country. That's especially some Kiwis 0:14:06.720 --> 0:14:08.800 that are leave in the country and people who came 0:14:08.880 --> 0:14:11.920 in on short term working visas two years ago are 0:14:11.960 --> 0:14:14.120 now leaving the country as well. So there's quite a 0:14:14.200 --> 0:14:18.640 dynamic going on there the number coming into the country 0:14:18.679 --> 0:14:21.920 while falling away at the same time. So you take 0:14:21.960 --> 0:14:24.520 the stack of those coming in falling, those leaving going 0:14:24.600 --> 0:14:27.280 up and form you can get a pretty quick change. 0:14:27.840 --> 0:14:31.040 Is the New Zealand historical experience in the net flow. 0:14:31.400 --> 0:14:35.240 And that's why actually forecasting population growth in New Zealand 0:14:35.520 --> 0:14:39.640 is a complete dog's breakfast because forecasting net migration flows. 0:14:39.880 --> 0:14:43.040 I remember first proving this back in about nineteen ninety two. 0:14:43.200 --> 0:14:45.840 You can't do it. They can't do it in Australia either, 0:14:46.160 --> 0:14:49.360 because these flows are so strong on both sides of 0:14:49.360 --> 0:14:52.240 the ledger, doesn't take much of one or both of 0:14:52.280 --> 0:14:55.720 them moving, and the numbers can train change fairly quickly. 0:14:55.800 --> 0:14:58.760 So people should just be aware that when we get 0:14:58.760 --> 0:15:01.400 a bit more downward moment picked up in the media 0:15:01.640 --> 0:15:05.520 about the net migration falling away, there will be extrapolations 0:15:05.560 --> 0:15:08.560 into negative numbers. And if a journalist comes through to 0:15:08.600 --> 0:15:10.840 me and say, is it realistic that we could have 0:15:10.880 --> 0:15:13.680 a net outflow again of minus twenty thousand people in 0:15:13.680 --> 0:15:16.000 a year's time, I'm going to have to say yes, 0:15:16.080 --> 0:15:18.520 because we don't know. You can't predict it. 0:15:18.800 --> 0:15:23.760 All right as possible. Super interesting, So let's just get 0:15:23.880 --> 0:15:25.880 properly what most people want to talk about and property 0:15:25.920 --> 0:15:27.360 and the impact that it's going to have on that 0:15:27.520 --> 0:15:31.080 huge impact through to New Zealanders and across the economy. 0:15:32.080 --> 0:15:35.000 So firstly, what are you hearing out there at the moment, 0:15:35.000 --> 0:15:38.240 what's the anecdotal talk and what's the data showing us? 0:15:38.280 --> 0:15:40.400 And are they are they similar or are they are 0:15:40.400 --> 0:15:41.120 they quite different? 0:15:41.640 --> 0:15:44.080 Yeah? No, the anecdotes and the data would be would 0:15:44.120 --> 0:15:46.120 be similar. And so if we look at some of 0:15:46.160 --> 0:15:48.560 the data in terms of price movements, and I use 0:15:48.600 --> 0:15:53.080 the ARII and Z's monthly nationwide house price Index measured 0:15:53.120 --> 0:15:58.360 there in the three months through to May, on average 0:15:58.440 --> 0:16:01.720 each month house pride this is foul one percent around 0:16:01.800 --> 0:16:04.720 New Zealand. But in the three months since then, was 0:16:04.720 --> 0:16:07.760 that Jurn July, three months to August, on average house 0:16:07.800 --> 0:16:10.760 prices have fallen only zero point three percent, so they've 0:16:10.760 --> 0:16:13.200 still been falling. In the month of August they were flat. 0:16:13.480 --> 0:16:16.920 So I'm prepared to say right now at a September 0:16:17.080 --> 0:16:20.240 end of September start of October, now we are in 0:16:20.360 --> 0:16:24.000 the low point of the house price cycle on average, 0:16:24.040 --> 0:16:27.280 and from here the prices will start to rise, but 0:16:27.360 --> 0:16:31.080 not necessarily rapidly. And that's because of what's happening with 0:16:31.240 --> 0:16:35.080 both demand and the supply of property. So if we 0:16:35.120 --> 0:16:37.640 look at the demand side, I can get a really 0:16:37.640 --> 0:16:39.920 good feel for what's happening in the coal face from 0:16:39.920 --> 0:16:44.680 my monthly survey of residential real estate agents, and about 0:16:44.760 --> 0:16:47.600 three months ago it was pretty dire. I had a 0:16:47.680 --> 0:16:50.720 net thirty five percent off the agent saying there are 0:16:50.800 --> 0:16:53.120 fewer people at open homes. No one's showing up. No 0:16:53.120 --> 0:16:56.160 one's drinking the coffee, even the donuts, et cetera. And 0:16:56.200 --> 0:16:58.720 in my most recent survey, I'll be sending a new 0:16:58.720 --> 0:17:01.720 one out any day now. Four weeks ago and net 0:17:01.840 --> 0:17:05.080 forty two percent of agents were saying there are more 0:17:05.119 --> 0:17:08.840 people showing up at open homes. I've got similar strong 0:17:08.920 --> 0:17:12.960 movements towards the other positive territory. When I asked them, 0:17:13.160 --> 0:17:15.800 are there more first home buyers showing up? Are there 0:17:15.840 --> 0:17:18.960 more investors showing up? So I can show definitively from 0:17:18.960 --> 0:17:22.120 my survey there, yes, the buyers are out there, they're 0:17:22.119 --> 0:17:25.520 looking at property, they are going out to starting to 0:17:25.520 --> 0:17:28.320 go to the auctions now as well. Now what about 0:17:28.359 --> 0:17:30.840 on the other side, what we can see is that 0:17:30.880 --> 0:17:33.760 there are more vendors who are coming forward as well. 0:17:34.000 --> 0:17:37.200 So at the end of August, the number of properties 0:17:37.240 --> 0:17:40.320 listed for sale was up about thirty percent from a 0:17:40.400 --> 0:17:44.200 year earlier, at the highest number nationwide about thirty four thousand, 0:17:44.359 --> 0:17:47.920 highest number since two thousand and fifteen. And again when 0:17:47.920 --> 0:17:50.920 I asked the agents, are you seeing more or fewer 0:17:50.960 --> 0:17:54.159 people come forward asking for property appraisals? I mean you 0:17:54.240 --> 0:17:56.080 do that if you're thinking about selling. I think I 0:17:56.119 --> 0:17:58.880 had a net fifty percent, most recently saying, yeah, there 0:17:58.880 --> 0:18:00.880 are more people wanting to know what their property might 0:18:00.880 --> 0:18:02.800 get if they were put it in the market. So 0:18:03.200 --> 0:18:05.720 this is where it gets interesting for real estate agents. 0:18:05.800 --> 0:18:10.000 This is fantastic news. More buyers and more sellers coming through, 0:18:10.080 --> 0:18:14.080 so good real estate turnover is in the offing. You know, 0:18:14.320 --> 0:18:17.359 I expect seasonally adjusted improvements in sales, but what it 0:18:17.359 --> 0:18:20.000 does to prices. As an economist, I've got to say, 0:18:20.080 --> 0:18:22.840 you can't really tell if both demand is rising and 0:18:22.920 --> 0:18:26.320 supply is rising. Nothing obvious pumps out in terms of 0:18:26.359 --> 0:18:30.240 the new equilibrium levels of prices. My expectation is, however, 0:18:30.440 --> 0:18:33.200 with the interest rates are falling out there, and they're 0:18:33.200 --> 0:18:37.000 having quite an impact on people's optimism, you will see 0:18:37.040 --> 0:18:40.080 prices edging up. But we're not seeing anything in terms 0:18:40.160 --> 0:18:43.440 of my view of prices taking off for a long time, 0:18:43.640 --> 0:18:45.919 and even if we go back to previous cycles, it 0:18:46.040 --> 0:18:50.360 usually wasn't until about four years, four years after prices 0:18:50.400 --> 0:18:53.480 bottomed out that you really got things cranking along, with 0:18:53.640 --> 0:18:57.880 nationwide prices rising over fifteen percent for the year for instance, 0:18:58.080 --> 0:19:03.240 So prices rising really soon, but at a relatively mild pace. Initially, 0:19:03.240 --> 0:19:04.600 i'd suggest what I. 0:19:04.560 --> 0:19:06.240 Am hearing is quite a few people in a bit 0:19:06.280 --> 0:19:11.240 of a rush now, which is not a massive case 0:19:11.240 --> 0:19:13.439 study of people, i'd say, but those anecdotes come in 0:19:13.520 --> 0:19:15.520 again sort of that I don't want to miss the 0:19:15.520 --> 0:19:17.520 bottom of this market for those who can afford to. 0:19:17.640 --> 0:19:20.480 So it is interesting just seeing that language change, and 0:19:20.680 --> 0:19:23.439 I wonder how much of that is deliberately, sorry, is 0:19:23.680 --> 0:19:27.359 specifically attributable to the interest rates environment changing. 0:19:27.960 --> 0:19:30.480 Yeah, I think the interest rates. People have enough awareness 0:19:30.480 --> 0:19:32.359 of what that is like going to do to the 0:19:32.400 --> 0:19:35.560 housing market eventually to the economy overall. There have been 0:19:35.600 --> 0:19:37.719 a lot of people who have been sitting out of 0:19:37.720 --> 0:19:40.119 the housing market wanting to buy, but you know, not 0:19:40.160 --> 0:19:43.040 willing to make a move with so many uncertain times, 0:19:43.280 --> 0:19:46.160 low job security recently, and the interest rates being high, 0:19:46.440 --> 0:19:48.679 who are now looking at getting in because they know 0:19:48.840 --> 0:19:52.240 eventually there'll be greater momentum out there. They know more 0:19:52.280 --> 0:19:55.080 investors will start looking again. Once the price of a 0:19:55.160 --> 0:19:59.159 thing gets up with momentum, it drags investors into that market, 0:19:59.200 --> 0:20:02.120 as we can see with the price of gold for instance, 0:20:02.359 --> 0:20:05.439 internationally at the moment rising and so it keeps rising 0:20:06.040 --> 0:20:09.399 for a while. And although I think the high job 0:20:09.520 --> 0:20:13.560 insecurity for a while will give reason for pores for 0:20:13.680 --> 0:20:16.040