Speaker 1: Junokoto. Welcome to shared lunch. I'm Garth Bray. Well winter
Speaker 1: is here not normally a boomer of a time for
Speaker 1: our property market, and the Reserve Bank is sounding a
Speaker 1: little loop warm about easing rates. Further so, what lies
Speaker 1: ahead for us? Time to check in with that sage
Speaker 1: of the savvy property investor, Tony Alexander see what he thinks.
Speaker 1: But before that, it's some important information you should always
Speaker 1: consider before investing.
Speaker 2: Investing involves the risk you might lose the money you
Speaker 2: start with. We recommend talking to a licensed financial advisor.
Speaker 2: We also recommend reading product disclosure documents before deciding to invest.
Speaker 2: Everything you're about to see and here is current at
Speaker 2: the time of recording.
Speaker 1: Tony, A rare pleasure to have you here face to
Speaker 1: face in Auckland. Love to have you with us. Yep.
Speaker 1: I'll get to the Reserve Bank in a second. But
Speaker 1: the centric starter that we've seen out very recently, the
Speaker 1: credit reporting stuff that shows business and consumer credit up.
Speaker 1: I mean it's not the lending is not where it
Speaker 1: was in twe but is that the first sign that
Speaker 1: things are getting better or is it still not looking great?
Speaker 3: Oh? We're economists don't generally look at the lending data
Speaker 3: for a sign of what's happening in the economy. We
Speaker 3: tend more to look at leading indicators, what's happening with
Speaker 3: consumer sentiment, business sentiment, these sort of things, investment, intensions,
Speaker 3: employment and tensions. So definitely interesting there. But for instance,
Speaker 3: if you look at the reserve banks lending numbers, the
Speaker 3: volume of lending to the farming sector is down about
Speaker 3: one percent or so on a year earlier. So do
Speaker 3: we look at that and go, farming's falling away. It's
Speaker 3: all getting really really bad, while not with commodity prices
Speaker 3: up about seventeen percent on a year earlier.
Speaker 1: So they're probably just paying off debt, aren't they. Because
Speaker 1: things are so good that it's actually a healthy sign.
Speaker 3: That's relevant because if we talk about the good returns
Speaker 3: being made by the farmers, oh, the region's going to boom.
Speaker 3: Rural towns are going to absolutely boom. Right, that's where
Speaker 3: I'm going to do my property investment. Yeah, we'll just
Speaker 3: remember the costs for operating a farm have gone through
Speaker 3: the roof in recent years. And yeah, they've been getting
Speaker 3: a voice in their ear to pay down debt for
Speaker 3: a long time. So the actual region stimulus. It's going
Speaker 3: to be there, but it's not really going to be
Speaker 3: what it's been in the past coming out of recessions.
Speaker 1: Just on that though, I looked at that Centrix data
Speaker 1: and there was like a heat map of how badly
Speaker 1: in areas, how badly behind people are. She was lush
Speaker 1: green all up the South Island, all in single digits.
Speaker 1: You get up into pretty much the whole of the
Speaker 1: North Island was a bit of an orange, and you
Speaker 1: get to Bay of Plenty, you get to the coast Titaffity,
Speaker 1: it was red and we're talking like seventeen eighteen percent,
Speaker 1: you know, in an areas and sign that's not a
Speaker 1: healthy sign. That's a two track economy, there isn't it.
Speaker 3: Well, yeah, for the moment, I think it does look
Speaker 3: like that, And in a way it's sort of a
Speaker 3: payback and a broad sense from earlier on when we
Speaker 3: saw from a housing market perspective, things were growing really
Speaker 3: strongly in the North Island but not in the South Island.
Speaker 3: I used to talk a lot about it that this
Speaker 3: boom and house prices. There was some in the South Island,
Speaker 3: but it wasn't as much as in the North Island,
Speaker 3: and so if we extrapolate that to businesses in general,
Speaker 3: probably you've got more businesses getting over optimistic in the
Speaker 3: North Island than the South Island during the boom, and
Speaker 3: so when you get the type monetary policy occur, there's
Speaker 3: more weeding out to do in the business sector, maybe
Speaker 3: residential property investment market in the North Island than the
Speaker 3: South Island. So that's sort of what I would put
Speaker 3: it down to. I wouldn't over extrapolate that towards right
Speaker 3: New Zealand's future for the next hundred years. It's back
Speaker 3: to the South Island. This population imbalanced twenty five percent
Speaker 3: in South Island or so seventy five percent North. It's
Speaker 3: going to reverse yet, No, it's just a bit of
Speaker 3: a cyclical thing from that earlier on boom which was
Speaker 3: more in the North.
Speaker 1: It just must be anecdotes that I keep running into
Speaker 1: people that are moving to christ Church the end to
Speaker 1: try and ditch the Auckland property prices.
Speaker 3: Well, that's definitely happening and it's going to keep happening
Speaker 3: as well.
Speaker 1: Yeah, yeah, I mean liquidations in some of that data
Speaker 1: were quite high. Business liquidations. We're talking like thirty percent
Speaker 1: I think was it up on year on year. That's
Speaker 1: not good.
Speaker 3: Yeah, yeah, definitely not good. But this is what I
Speaker 3: warned about from twenty twenty two. In fact, as early
Speaker 3: as the first half of twenty twenty one, I was
Speaker 3: warning residential builders just watch out. There's a boom underway.
Speaker 3: Lots of inexperienced, undercapitalized people are entering the residential construction sector,
Speaker 3: as widely defined, and there's going to be a weeding
Speaker 3: out period somewhere down the track. And then I morphed
Speaker 3: that into talking about over twenty twenty three of this
Speaker 3: weeding out is going to be across all sectors of
Speaker 3: the economy in twenty twenty four. And so that's what
Speaker 3: we saw with liquidations up et cetera last year. And
Speaker 3: then of course I was warning strongly from August last
Speaker 3: year when we saw the interest rates were coming down.
Speaker 3: A journalist wrote, We're going to be a rockstar economy again,
Speaker 3: and I thought, what a load of absolute rubbish. There
Speaker 3: are going to be businesses that are going to be
Speaker 3: caught out and some of the weakness we see in
Speaker 3: the economy at the moment. It's the reality check as
Speaker 3: I think businesses are realizing, oh, who was right? This
Speaker 3: isn't a boom. We survived to twenty five, it's not enough.
Speaker 3: And some businesses, either from their own volition or the
Speaker 3: ird or the bank the creditors are realizing we can't
Speaker 3: make it.
Speaker 1: If we don't have a boom.
Speaker 3: Then, given the cost we've got going up, the massive
Speaker 3: margin compression, we've got to close down. And so that
Speaker 3: weeding out process is still rolling through twenty twenty five. Actually,
Speaker 3: as the CENTRIC data showed in the construction sector, where
Speaker 3: there was a much sharper increase in number of liquidations
Speaker 3: sort of trending upwards in the past three years compared
Speaker 3: with other sectors like retail, hospitality.
Speaker 1: Because broadly, I think this month that actually turned, or
Speaker 1: last month it's turned, and it almost looks like the
Speaker 1: worm is turning down. The liquidations might just be starting
Speaker 1: to trend down. You don't think it's over.
Speaker 3: It'd be nice to think that, but I think it's
Speaker 3: too soon to really call that. Having said that, although
Speaker 3: my commentary since August has been a negative, quite shockingly
Speaker 3: so to some people, I do have to keep emphasizing
Speaker 3: there is still a recovery underway. We've got the absence
Speaker 3: of those crunching interest rates, out there. We have the
Speaker 3: surprisingly good returns in parts of the primary set sector,
Speaker 3: more foreign students coming into the country, there is some
Speaker 3: business investment infrastructure, so there is a recovery underway, but
Speaker 3: it's not an especially strong one. It's the absence of
Speaker 3: the strong upturn, which is catching out some businesses just
Speaker 3: in the last gasp of their breath for this year.
Speaker 1: If we look at what the Reserve Bank came out with,
Speaker 1: which was effectively a little bit of a split decision there,
Speaker 1: they took some convincing the full board that a full
Speaker 1: cut was needed of twenty five basis points. Apparently they
Speaker 1: even talk about cutting fifty What do you take out
Speaker 1: of that.
Speaker 3: Yeah, I wouldn't have voted for a cut. I would
Speaker 3: have stuck there at three point five percent.
Speaker 1: Yeah.
Speaker 3: No, people don't want to hear that because I've just
Speaker 3: said the economy this year weaker than people were thinking.
Speaker 3: That sounds like less inflationary pressure. Not so quick, because
Speaker 3: the other thing I've been saying since August last year,
Speaker 3: on top of the economy's going to still be a
Speaker 3: bit weak going forward, is there are still inflationary pressures
Speaker 3: bubbling on underneath in the economy. Where are they coming from, well,
Speaker 3: they're coming through the business sector. Generally, it's when you
Speaker 3: go and buy your cheese also at the supermarket there
Speaker 3: or you meet So the high commodity prices great news
Speaker 3: for our farmer's, horticulturalists, et cetera. But it feeds through
Speaker 3: into the supermarket, so we feel it there as a consumers.
Speaker 3: But just generally, the costs are still rising out there.
Speaker 3: And I've talked a lot about our price seat behavior
Speaker 3: by businesses. And if we look, for instance, at the
Speaker 3: A and Z's Monthly Business Outlook Survey, on average, since
Speaker 3: nineteen ninety two, when inflation started settling around two two
Speaker 3: and a half percent on average and net twenty six
Speaker 3: percent of businesses have said I'm raising my prices within
Speaker 3: the next year. That's still running at forty five percent.
Speaker 3: So we've got a well above average proportion of businesses
Speaker 3: saying I'm putting my prices up. And this is when
Speaker 3: conditions are still weak. We've had recession or two recessions
Speaker 3: in the economy in the past three years. You would
Speaker 3: expect that number to be way way down, And of
Speaker 3: course it comes from a net seventy three percent of
Speaker 3: them are saying my cost arising, I expect them to
Speaker 3: go higher in a year's time. So my concern is
Speaker 3: that monetary policy aims at where things are going to
Speaker 3: be in eighteen to twenty four months time. Well, I
Speaker 3: expect the economy is going to be stronger. And when
Speaker 3: I look at the A and Z survey and I
Speaker 3: offset it against another survey from the New Zealand Institute
Speaker 3: of Economic Research, you know they've done that survey since
Speaker 3: the nineteen sixties. What it says to me is this,
Speaker 3: once businesses see customers coming through the door and good
Speaker 3: numbers like next year, to raise their prices to rebuild margins.
Speaker 1: And that will bring the inflation back.
Speaker 3: The inflation will come back. And so that's why I
Speaker 3: think the Reserve Bank's mind now has shifted away from right,
Speaker 3: we no longer need high interesstrates to crunch inflation. To
Speaker 3: let's be careful, we don't continue the whipping around behavior
Speaker 3: of the past, you know, one to two decades and
Speaker 3: cut too far now and have to rapidly increase late
Speaker 3: twenty six, twenty twenty twenty seven.
Speaker 1: Right, they really are taking quite a long view there.
Speaker 1: Hard to get that long view though, I mean, you
Speaker 1: saw Christian hawksbeare who's you know, acting governor at the moment,
Speaker 1: came out kind of with a well, it's not just
Speaker 1: what we see in front of us, it's what we
Speaker 1: see either side of us. They have these alternative scenarios
Speaker 1: which I kind of boiled down into my head to all,
Speaker 1: we're facing some headwinds and it's all going to get
Speaker 1: more expensive, or all, we're facing these headwinds and we're
Speaker 1: just kind of going to give up. You know, the
Speaker 1: whole economy is going to go into a coma globally
Speaker 1: almost Am I way off there? Yeah?
Speaker 3: No, the economy is wild. Economy is still going to grow.
Speaker 3: Like I was reading commentary this morning about the OECD
Speaker 3: have slashed their forecast for world growth over the next
Speaker 3: two years. Well that was the word that was used
Speaker 3: in there. It was only a reduction of about zero
Speaker 3: point two percent in their forecast this year and zero
Speaker 3: point one percent next year. So people have detail as media,
Speaker 3: what are you going to do? But we pay attention
Speaker 3: to Oh there's a shocking headline, you know, and we
Speaker 3: read it, but the actual change is relatively small. And
Speaker 3: you know the Trump Terwi war that's underway, it's definite
Speaker 3: negative for the world economy. There are two minds on
Speaker 3: does this boost world inflation.
Speaker 1: Or lower it?
Speaker 3: Lower it? Even Treasure and Reserve Bank can't agree on
Speaker 3: that one.
Speaker 1: For New Zealand, hence those different scenarios. Different scenario. We're
Speaker 1: going to land here in the next sort of six
Speaker 1: to twelve months.
Speaker 3: What are we saying, still slow recovery, which will strengthen
Speaker 3: in twenty twenty six. But we shouldn't ignore the fact
Speaker 3: that these are good prices for the farmers being received
Speaker 3: out there. They will gain some greater confidence, do some spending.
Speaker 3: And contrary to what I was thinking up until a
Speaker 3: few months ago, where I said I think the recovery
Speaker 3: is going to be broadly based in the economy, it
Speaker 3: will now start more in the regions you see it
Speaker 3: first and in Theicargo and Neden, christ Church gets it,
Speaker 3: Taranaki plenty Waykatta get it. Auckland will be seeing it
Speaker 3: early next year, Wellington maybe twenty twenty seven. Something will
Speaker 3: flow through. It's just the normal lag in the process.
Speaker 3: So broadly economic recovery is underway. But my message to
Speaker 3: people when it comes to boring and interest rates, this
Speaker 3: is almost as good as it's going to get almost
Speaker 3: on the mortgage mortgage rates.
Speaker 1: That was exactly what I want to ask you next.
Speaker 1: You've seeing banks now actually jousting again. I mean they're
Speaker 1: you know, skuting about the fact that they're under sort
Speaker 1: of four point nine percent. Yeah, eighteen months, Like that's
Speaker 1: a wonderful sort of a number. Not bad, I suppose
Speaker 1: in recent times we've seen a lot lower. What's going
Speaker 1: on there are they're just trying to scoop up some
Speaker 1: of those I think it was like thirty billion a
Speaker 1: month that we're going to be rolling over their mortgages.
Speaker 1: I think it was. Yeah, a lot of people.
Speaker 3: Yeah, because everyone's been fixing sort of one year for
Speaker 3: a number of years now. Not many people locked in
Speaker 3: for the five years at two point nine nine percent,
Speaker 3: as I was jumping up and down saying I would
Speaker 3: do for eleven month months starting exactly last week five
Speaker 3: years ago. That's when we had the two point nine
Speaker 3: to nine percent for five years first to appear in
Speaker 3: twenty twenty, and it lasted for about eleven months. And
Speaker 3: so you've just got to think there's actually a group
Speaker 3: of people out there for whom their interstrates are now
Speaker 3: jumping up from two point ninety nine to four ninety
Speaker 3: nine or so. Poor beggars all that far. At least
Speaker 3: they got that time. You know, at the lower rates there,
Speaker 3: it'll be a shock. It'll be a shock of for
Speaker 3: them out there. Don't anticipate that the interest rates go
Speaker 3: much lower than they are at At the moment. The
Speaker 3: financial markets are looking towards a future where global inflation
Speaker 3: is slightly higher, US budget deficit blowout, et cetera. Places
Speaker 3: upward pressure on medium to long term interest rates are everywhere,
Speaker 3: and there is an economic recovery underway in New Zealand.
Speaker 3: It's hard to talk about interstrates still needing to be
Speaker 3: cut when there's an economic recovery underway, Like duh.
Speaker 1: Yeah, right, there's normal medicine reques. Does that mean? I
Speaker 1: suppose if you're in a position where you're watching these
Speaker 1: rates and you're thinking, oh, maybe I should break, It's like, well,
Speaker 1: everybody's situation is their own. We should say this is
Speaker 1: not financial advice, your own circummit senses dictate what you
Speaker 1: should do, but potentially something to consider as hey, it's
Speaker 1: it's going to be a longer interest rate picture.
Speaker 3: For if I had a mortgage that was maturing let's
Speaker 3: say in three months time or six months time, I
Speaker 3: wouldn't feel in need of Oh hang on, I'd better
Speaker 3: get in right now, because inflation's going to jump up,
Speaker 3: and in three or six months time the interest rates
Speaker 3: are going to be half a percent high.
Speaker 1: No, I don't think that'd all see that.
Speaker 3: No, I think And even if people are going one
Speaker 3: year fixed or two years or three years, it's going
Speaker 3: to be you know, here or there six to one,
Speaker 3: half a dozen of the other. Because I can't yet
Speaker 3: see enough form in the interest rates outlook to say
Speaker 3: this is when interest rates are going to start jumping up.
Speaker 3: This is how much they're going to go by. I'd
Speaker 3: want to get cover against that. Probably it's the other
Speaker 3: side of the equation. It's the employment picture that's more
Speaker 3: important at the moment, isn't it. Yeah, that's I think
Speaker 3: one of the reasons the real estate market is still
Speaker 3: being held back. So in my monthly survey of realistic
Speaker 3: agents been doing it for five years now now, on average,
Speaker 3: in five years, twenty one percent of the agents have
Speaker 3: ticked the box saying buyers are worried about their jobs.
Speaker 3: At the start of twenty twenty four, it was fourteen
Speaker 3: one four percent. So we started last year with stronger
Speaker 3: than average job security in the economy. It was one
Speaker 3: wonderful well. Come June last year, fifty six percent of
Speaker 3: agents saying people are worried about their jobs. And my
Speaker 3: latest survey are just sent out. The results of that
Speaker 3: fifty one percent of agents still say people are worried
Speaker 3: about their jobs. And I think that's one reason the
Speaker 3: housing market has failed to continue the recovery we saw
Speaker 3: in the second half of last last year. And why
Speaker 3: for the second time now since the start of twenty
Speaker 3: twenty three, a recovery has fizzled out again. And I
Speaker 3: think the labor market is one of the factors in play.
Speaker 1: And you you see it at all levels, I guess, because
Speaker 1: if you're not if you're not selling, you're not buying,
Speaker 1: you're not seeing people transitioning out of homes into retirement
Speaker 1: villages and so on, you just everything kind of slows down.
Speaker 1: And yep, you're still seeing listings and you're still seeing
Speaker 1: stuff being built, right.
Speaker 3: Yeah, yeah, Well, the level of construction out there still
Speaker 3: seems are pretty strong. In fact, as have been pointing
Speaker 3: out to people, one of the structural shifts in you ye,
Speaker 3: relevant to why house prices won't rise as much on
Speaker 3: average in the future is that the level of construction
Speaker 3: versus the population is now higher than we've had in
Speaker 3: the past, so more supply coming forward and land being
Speaker 3: made available, densification and tensification.
Speaker 1: Then the consent stuff as well. I mean they're talking
Speaker 1: this private consenting outfit that's saying we'll get you a
Speaker 1: consent of its simple in ten days. You've got the
Speaker 1: government requiring councils to say how well you performing, and
Speaker 1: apparently that's lifted it from like eighty percent in time
Speaker 1: to like ninety more than ninetyer cent in time. So
Speaker 1: there's like the system's working better, isn't it. But that
Speaker 1: means more supply therefore perhaps lower prices.
Speaker 3: More supply coming forward, not so much lower prices, although
Speaker 3: a net thirty eight percent of realistate agents at the
Speaker 3: moment say prices are falling in there in the area.
Speaker 3: So yeah, that's quite a strong result or almost back
Speaker 3: to where we were in the middle of last year.
Speaker 1: I was looking. There was some There was a story
Speaker 1: this week about how the listed property trusts out there
Speaker 1: have seen their valuations basically kind of hit the bottom
Speaker 1: and start to build again and there's more interest there.
Speaker 1: Do you take any kind of indication from that end
Speaker 1: of the market.
Speaker 3: Don't look at that at all myself. No, I look
Speaker 3: more at what I'm picking up from my surveys of
Speaker 3: the agents, the mortgage brokers, the property investors, et cetera.
Speaker 3: Are out there, and that tells him what's happening right now.
Speaker 3: I mean, the market will turn around, but I'm thinking
Speaker 3: this is more a story for twenty twenty six than
Speaker 3: it is for twenty twenty five. With the labor market
Speaker 3: uncertainty at the moment, the strong supply that sits out there.
Speaker 3: Net migration only plus twenty six thousand in the past year.
Speaker 3: Two years ago almost it was one hundred and thirty
Speaker 3: five thousand net. The average for ten years net migration
Speaker 3: gained for New Zealand is fifty thousand. So let's say
Speaker 3: we're running at about half average recent average at the moment.
Speaker 3: So whereas a year ago or just over a year ago,
Speaker 3: in my survey of property investors of landlords, I had
Speaker 3: about a net twenty five percent of landlords saying it's
Speaker 3: easy to get a good tenant, it's bonser, no worries.
Speaker 3: Now I've got about a record net thirty three percent
Speaker 3: or so, saying it is hard to get a good tenant.
Speaker 3: So for the moment, the real estate market is subdued
Speaker 3: buyers market.
Speaker 1: I'm many of the places in the country where that's
Speaker 1: going to be particularly attractive or tricky, or it's just
Speaker 1: a case of shopping around.
Speaker 3: Oh, you shop around, you find where you want to
Speaker 3: live the broad area because it's near your church, it's
Speaker 3: it's near your relatives, your friends, your sports fields, et cetera.
Speaker 3: And you've got a greater chance of being able to
Speaker 3: get something without having to accept. Okay, it's an operating
Speaker 3: meth house at the moment, so I've got what are
Speaker 3: you going to do. I've got to take it. You're
Speaker 3: not really going to have to be making such die compromises.
Speaker 3: There will be compromises, but not so much of that
Speaker 3: sort of stuff.
Speaker 1: Sure, And I mean, are you getting that sense of
Speaker 1: confidence because you speak to property investors in large numbers.
Speaker 1: What are they telling you?
Speaker 3: What are they give the Well, then the investors are
Speaker 3: interested in buying. But it's like when you see a
Speaker 3: market relatively flat, you're thinking, am I missing something? If
Speaker 3: they're not buying, maybe I shouldn't buy as well, because
Speaker 3: we're social animals and we take our queue for what
Speaker 3: to do from what other people are doing. This is
Speaker 3: the test. There aren't many Warren Buffets, the sort of
Speaker 3: person when everyone else is going that way, he goes no, no, no,
Speaker 3: I go this way. This is part of that challenge
Speaker 3: that for the moment, prices aren't rising, and so you're thinking, well,
Speaker 3: if I buy now, what if the price goes down
Speaker 3: three or four percent? Will I feel like an an idiot?
Speaker 3: And we call that foop fear of overpaying. And so
Speaker 3: I've got a measure of that from my real estate
Speaker 3: agent survey as well. And now and then I'll do
Speaker 3: a graph of foop has gone up so that more recently,
Speaker 3: over the past four months, more buyers are worried.
Speaker 1: Am I buying?
Speaker 3: Then the price goes down? Whereas FOMO only five percent
Speaker 3: of agents say buyers are feeling fomo. It's a buyers market,
Speaker 3: is all I can say. Wow, despite the foop, despite
Speaker 3: the foop, Yeah, that's right. Hey, no one's going to
Speaker 3: pick the bottom. You can't pick the top. And you've
Speaker 3: got to be thinking, if I'm buying a property, I'm
Speaker 3: probably going to be in it or owning it as
Speaker 3: a rental for a great number of years. Seriously, who
Speaker 3: gives a great worry at all that what happens in
Speaker 3: the next twelve to twelve months.
Speaker 1: Yeah, yeah, that twelve months won't matter twenty years from.
Speaker 3: Now, surely or not. Trouble is we all live in
Speaker 3: the short term.
Speaker 1: True, Just thinking in the short term and thinking back
Speaker 1: to the budget, there was some supposed long term, long
Speaker 1: term thinking in the budget there around things like key
Speaker 1: we saver and so on. Was there anything in there
Speaker 1: that jumped out and made you think, kriky, we're on
Speaker 1: the right track here, right track and terms of well,
Speaker 1: just in terms of the long term plan for how
Speaker 1: we get people saving more in a position to be
Speaker 1: able to either invest in property, invest in whatever they're doing.
Speaker 3: We are we are we answering that question, Well, the
Speaker 3: budget wasn't focused on that. The budget was all about
Speaker 3: putting in place a better fiscal track to get the
Speaker 3: Crown accounts for New Zealand ready for when the next
Speaker 3: shock comes along. I mean, you can virtually guarantee within
Speaker 3: the next ten years there's going to be another major
Speaker 3: shock at the New Zealand economy. We've just got no
Speaker 3: idea when it's what it's going to be, how bad
Speaker 3: it's going to be. But the accounts need to be
Speaker 3: ready for that, especially given our high dependence in New
Speaker 3: Zealand on people saving overseas. We use there, we use
Speaker 3: their money, and so yeah, improving savings is definitely a
Speaker 3: positive i'd suggest for New Zealand, but the budget wasn't
Speaker 3: aim data doing that, and unfortunately for Key we Savor
Speaker 3: from my point of view, right early on, when businesses
Speaker 3: were allowed to opt out of making a contribution by saying, oh,
Speaker 3: we're going to put it into the person's salary instead
Speaker 3: of contributing three percent ourselves, well, i'd suggest most people
Speaker 3: who had it put into their fully costed up salary
Speaker 3: in that year might have noticed. I didn't get much
Speaker 3: of a salary increase in the next three or four
Speaker 3: years after that one, and I think for me, that's
Speaker 3: a bastardization of Key we Savor away from what it
Speaker 3: could have been.
Speaker 1: So and it's too late to try and fish that. Obviously,
Speaker 1: the costs are quite high there. You've just got to
Speaker 1: try and work on it. Yeah, right, it's nothing else
Speaker 1: in there. Obviously, the tweaks that they made to things
Speaker 1: like contributions. It's all sort of water under the bridge.
Speaker 3: Yeah, it's neither here nor there. I think in terms of,
Speaker 3: you know, the outlook, do I think all suddenly there's
Speaker 3: a big pool of savings and this is going to
Speaker 3: provide capital for growing New Zealand businesses.
Speaker 1: No, no, no, no no.
Speaker 3: This was hardly even at the margin sort of stuff there.
Speaker 3: It really doesn't classifies anything major. Even when we look
Speaker 3: at something like the twenty percent first year depreciation allowance,
Speaker 3: businesses can claim for their for their investment, and it
Speaker 3: sounds good and I'd say, yes, it is a good thing.
Speaker 3: The issue is a lot of businesses were already saying
Speaker 3: I'm going to invest and ah, now I can claim
Speaker 3: more this year, I'll whack. Oh it's going to be
Speaker 3: of cash flow assistance and it might stimulate some more
Speaker 3: business investment in New Zealand. But it doesn't really change
Speaker 3: the outlook. I'm not actually aware of anyone who's actually
Speaker 3: changed their outlook for our economy on the basis of
Speaker 3: the budget.
Speaker 1: I certainly haven't so yet. Apparently it's going to increase
Speaker 1: our gdp BI. I can't remember their figure by so much,
Speaker 1: but enough to sort of nudge it up by more
Speaker 1: than half a percent.
Speaker 3: I think it's going to be one percent over twenty years.
Speaker 3: So full credit to Treasury for actually writing that. You're saying, yes,
Speaker 3: there's a positive impact, but by the way, it's the
Speaker 3: next two decades, and they're probably right, it is probably
Speaker 3: going to be something like that, But it doesn't change
Speaker 3: the key dynamic. Let's say, for businesses at the moment
Speaker 3: of their margins are severely compressed, their costs are still rising,
Speaker 3: they're wondering, really, when do more customers come forward? That
Speaker 3: stuff is far more important than these tweaks from the budget.
Speaker 1: I wanted to try and get to a bit of
Speaker 1: long term stuff now, and if we can just try
Speaker 1: and sort of think long term, people talk about I
Speaker 1: think the phrase the great wealth transfer is one that's
Speaker 1: been thrown around, this idea that you've got a range
Speaker 1: of people probably hitting retirement now and getting on and
Speaker 1: they're getting at the point where they're going to potentially
Speaker 1: hand that wealth to another generation and so on. I mean,
Speaker 1: people talk about that and how people have built that
Speaker 1: up and might leave it to their kids and grandkids.
Speaker 1: Are the implications of that for the property market.
Speaker 3: We lack research on what is really going to happen,
Speaker 3: And even if one looks at research coming from countries
Speaker 3: which have already gone through aging processes like Japan, Germany
Speaker 3: and a few others, it may not be entirely relevant
Speaker 3: to the New Zealand situation. And maybe especially when we've
Speaker 3: looked at one of the developments in the past eighteen months,
Speaker 3: is that with soaring local authority rates and insurance premiums
Speaker 3: and electricity prices, butter and meat, any spreadsheet a person
Speaker 3: has run for this is what I can afford to
Speaker 3: spend in my retirement, It's all out the window. Any
Speaker 3: savings or investment calculations you made from you know, when
Speaker 3: campaigns first were run by the government on save for
Speaker 3: retirement late eighties, early nineties, it's all out the window.
Speaker 3: And so I can't help but thinking that some people
Speaker 3: who have reached the conclusion I'm actually going to have
Speaker 3: to spend more of what this inheritance passing on is
Speaker 3: going to be? Why should I sacrifice even more for
Speaker 3: these ungrateful kids or whoever a situation? And so I
Speaker 3: think for the New Zealand context, it's really hard to
Speaker 3: figure out any implication for what's going to happen. However,
Speaker 3: when I was running through a little list earlier on
Speaker 3: of reasons why the housing market is subdued at the moment,
Speaker 3: and I did mention a lot of construction, a lot
Speaker 3: of supply out there, the employment market worries low fomo,
Speaker 3: I did make a little bit of a reference earlier
Speaker 3: on to investors doing selling that extra supply is on
Speaker 3: the market. Other investors come in bring it up to
Speaker 3: healthy home standards, or young buyers come in and watch
Speaker 3: some videos and learn how to use a screwdriver and
Speaker 3: a hammer and do it up themselves. There's an opportunity
Speaker 3: to add value to one's proper by improving undertaking long
Speaker 3: overdue maintenance on some of those properties. So I think
Speaker 3: that's one elements in there from the retiring genet generation
Speaker 3: or already in retirement.
Speaker 1: But is that like a wee blip or is that
Speaker 1: like the start of quite a strong trend if you like,
Speaker 1: Because there are a lot of people out there that
Speaker 1: would be facing those circumstances.
Speaker 3: It's probably a move up to a higher level of
Speaker 3: investors selling on average than was the case. So if
Speaker 3: it was chugging along like this before, it's now I
Speaker 3: think going to chug along at a higher level like
Speaker 3: that for a number of years, so higher average listings
Speaker 3: of property than would have been the case. So I
Speaker 3: don't think it's a blip, but it's going to be sustained.
Speaker 3: But that doesn't mean it sustains its negative impact on
Speaker 3: the market for a great number of years. It's just
Speaker 3: a bit more supply out there for buyers to choose from.
Speaker 3: And you have to think to yourself, you know, from
Speaker 3: having all of us watch this housing market be so
Speaker 3: difficult for young buyers in particular for so many years.
Speaker 3: Thank goodness, this is a really good story, quite frankly.
Speaker 3: But yeah, just to finish off with the passing on
Speaker 3: to the next generation, I don't know how that spins
Speaker 3: out in terms of how does it affect the saving
Speaker 3: is an investment desire of the generation that think it's
Speaker 3: that they're going to get it, And you've got to
Speaker 3: watch your assumptions because what I'm increasingly hearing from people
Speaker 3: who are thinking about when they pass and then passing
Speaker 3: on the wealth, they're going to skip a generation, or
Speaker 3: they're going to skip two generations and give it to
Speaker 3: not even the grand kids, the great grand kids, or
Speaker 3: something like this, people need to watch their assumption about
Speaker 3: who gets the dosh.
Speaker 1: You've got to wonder as well whether it's going to
Speaker 1: change people's approaches, like is it just going to be
Speaker 1: a straight roll into the same kinds of investments property
Speaker 1: investments as before. Are people going to take different approaches
Speaker 1: as well?
Speaker 3: Yeah, exactly. I think there's going to be more diversification
Speaker 3: in people's investment portfolios when they needs to save for retirement.
Speaker 3: At central messages were getting hammered by the government from
Speaker 3: the early nineteen nineties. It was soon after the shear
Speaker 3: market had crashed in nineteen eighty seven, and people, i
Speaker 3: think naturally moved towards other assets like residential property, assisted
Speaker 3: by interst rates falling sharply. In the early nineteen nineties,
Speaker 3: inflation went from averaging eleven percent to about two and
Speaker 3: a half percent. Straits are foul away, we had migration
Speaker 3: numbers getting stronger. It all came together to bring a
Speaker 3: lot more people into the residential property investment market from
Speaker 3: the mid part of the nineteen nineties than we'd seen before.
Speaker 3: I think now that extra layer of people is slowly
Speaker 3: going to be dissipated away. We're still going to be
Speaker 3: left with a lot of people investing in residential property.
Speaker 3: But I think more people now are going to be
Speaker 3: looking at other areas in which to invest their money,
Speaker 3: be it either for retirement or for something special. In
Speaker 3: ten or twenty years time, I think there'll be more
Speaker 3: diversification away from property. But still one thing of the
Speaker 3: population is still going to be renting, So the need
Speaker 3: for the rental population, the rental stop to be out there,
Speaker 3: is still going to be strong.
Speaker 1: Tony Alexander, thank you so much, and thank you for watching.
Speaker 1: For listening, whether you're on iHeart or straight off the
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