Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
Nothing to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
First Credit Union doubled its online savings rate off to 1.50%
BUILDING CONSENT ISSUANCE SLOWS SHARPLY
There were 35,236 new homes consented in the year ended March 2024, down -25% compared with the same year prior. Recall it peaked the the May 2022 year at 51,000. In March 2024 there were only 2931 residential dwelling consents issued, down -26% overall from the same month a year earlier. For apartments it was down -32%, for townhouses down -29%. Some are suggesting a bottom is being reached.
HEADING LOWER
Barfoot & Thompson's sales and selling prices are heading lower as winter approaches. Their sales volumes and prices both dropped last month, and stock levels remain high at the end of April.
PROFIT SAG
BNZ reported that its interim profit dropped, with its income and net interest margin falling and expenses rising.
NZGBs REMAIN VERY POPULAR
Treasury tendered $500 mln in two tranches today of Government Bonds. They got 66 bids worth $1.378 bln, The May 2030 $250 mln went for 4.70% average yield pa, very similar to the same maturity two weeks ago. The April 2023 went for a yield of 4.83%, up from 4.50% six weeks ago.
A SPAT BETWEEN FRIENDS
New Zealand took Canada to an independent disputes tribunal over the issue of Canadian rules blocking our dairy access, something that isn't supposed to happen under the CPTPP that both parties are signatories to. New Zealand won. But the Canadians are not recognising the decision. Our trade minister said we are not backing down. War !
RESIGNED TO POOR SERVICE
Consistently high volumes of telco customer complaints have become the 'new normal', the disputes resolution provider says. Billing issues are the core matter complained about. Despite these being longstanding issues there is little progress to report. The majors don't seem to care if these results are anything to go by. Bad service isn't having commercial consequences.
THE SATISFACTION STAKES
The Co-operative Bank came out on top in Consumer NZ’s annual banking satisfaction survey. TSB was second, and ANZ third marginally ahead of ASB and BNZ. Westpac trailed the pack of retail banks.
HEARTLAND OUTLOOK UPGRADE
Fitch Ratings has revised the Outlook on the Long-Term Issuer Default Ratings of Heartland Group Holdings Limited (HGL) and its subsidiary, Heartland Australia Group Pty Ltd (HAG), to Stable from Negative. The Outlook of another subsidiary, Heartland Bank Limited (HBL), remains at Stable. Fitch has also affirmed the Long-Term IDRs of HGL and HBL at 'BBB' and the Long-Term IDR of HAG at 'BBB-'. You can compare the ratings agency rating codes here.
NZ STORY HAS A NEW INITIATIVE
Watch it here.
SURPLUS SHRINKS
Australia's merchandise trade surplus fell to +AU$5 bln in March from a downwardly revised +AU$6.6 bln in the previous month. March came in well below market forecasts of +AU$7.3 bln. It was the smallest trade surplus since November 2020, as exports grew much slower than imports.
SWAP RATES STEADY
Wholesale swap rates are likely to be little-changed again today from yesterday. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 5.63%, a level it has hovered around for more than 60 days. The Australian 10 year bond yield is little-changed from yesterday, now at 4.51%. The China 10 year bond rate holding during their holiday at 2.31%. The NZ Government 10 year bond rate is down -2 bps to 4.94% and the earlier RBNZ fix was at 4.91% and up +1 bp from yesterday. The UST 10yr yield is down -4 bps from yesterday at 4.63%. Their 2yr is now at 4.95%, so the curve is shallower at -32 bps inverted.
EQUITIES MIXED
The NZX50 is unchanged in late trade today. The ASX200 is up +0.5% in afternoon trade. Tokyo has opened its Thursday trade essentially unchanged too. Hong Kong has opened up +2.2% today. Shanghai is still closed for the May Day holiday (Chinese Labor Day) but Singapore is back and up +0.4%. Wall Street closed its Wednesday session with the S&P500 down -0.3% and unable to hold its post-Fed rally.
OIL SOFTER AGAIN
The oil price is soft again today from this time yesterday, down about -US$2 at just over US$79/bbl in the US, while also to just on US$83.50/bbl for the international Brent price.
GOLD RISES BACK
In early Asian trade, gold is up +US$32 from yesterday, now at US$2319/oz.
NZD HOLDS FIRMISH
The Kiwi dollar has risen nearly +½c over the past 24 hours, now at 59.3 USc. Against the Aussie we are a bit softer at 90.7 AUc. Against the euro we are little-changed at 55.3 euro cents. This all means the TWI-5 is now at 69, and up about +20 bps.
BITCOIN RETREATS FURTHER
The bitcoin price has fallen to US$57,414 and down another -3.9% from this time yesterday. Volatility of the past 24 hours has been high at +/-3.3%.
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90 Comments
Sorry, we only build houses when interest rates are low and house prices are booming (noting the two are related). Them's the rules.
Apparently, if we do dezoning, rezoning, ozoning (or whatever) and have debates about tax incentives / disincentives for another 20 years, it will all get better.
By that logic, supermarkets would only make profits if there were widespread food shortages across the country and the authorities subsidised food through various means.
There are many here who argue that there is limitless demand for housing in NZ from investors and FHBs alike, so the industry should be able to earn decent profits without ultracheap money artificially propping up demand and construction inflation running at >20% pa.
Similar way to how we have before (for decades)... Any verified builder can at anytime opt to build a standard spec house on pre-prepared Crown land for Kainga Ora (or a CHP) to manage. In the good times, Govt secures land etc, when things get rough, builders switch to Govt work.
I would also go for US mortgage model, and tax capital gains to within an inch of their lives.
We need to manage ourselves out of this housing ponzi economy.
Nothing that complex is needed.
Like we did in the old days, one interest rate for residential development, and other interest rates for other purposes. (i.e. certain 'desirable' lending is subsidized by a few fractions of a % by RBNZ & government but no so much that private banks/lenders can escape with a free ride.)
Sorry. I feel I must apologize for the black humor.
Maybe Kiwis just like it rough?
[Sorry. It is wrong to jest about things that are really big.]
(I'm sure there is a point here ... Just can't think what it was ... Was it, NZ has very bad directors? ... No. Mr. Jackson is good. ... Maybe we just have terrible actors? ... Yup. That's it. .. )
Potentially the largest wealth disintegration ever on the ASX. Pretty much guaranteed.
Shareholders in sin-binned lithium explorer AVZ Minerals face one of the biggest wealth wipeouts in sharemarket history after management said it will delist from the ASX on May 13 as it battles for control of the world’s largest hard rock lithium deposit in Africa.
The Perth-based explorer has more than 21,100 shareholders with paper wealth of $2.8 billion tied up in the shares that last traded on the ASX in May 2022 for 78¢.
https://www.afr.com/markets/equity-markets/avz-flags-delisting-sharehol…
So Starbucks and Maccas both missed earnings. But the collapse of Starbucks is dramatic:
-- Company-wide same-store sales fell 4% and traffic fell 6% on Q1
-- In China, same-store sales plunged 11% with an 8% decline in the average order
-- International same-store sales collapsed 6% when expectations were for +1.4%
And the most telling, from customer insights, most loyal customers are looking for discounts.
https://www.cnbc.com/2024/04/30/starbucks-sbux-earnings-q2-2024.html
Boycott? Antifa smashed up a Starbucks store in Portland. Symbol of imperialism apparently.
https://www.kgw.com/article/news/local/portland-state-university-pro-pa…
Recessions means people buy more 'comfort food'. I.e. greasy, fat laden stuff - high in cheap calories with sweetness via fat. Maccas will bounce back. When skirt hems rise, we'll know we're out of the bad times. (Sorry, again for the black humor, but this proven stuff from many past recessions.)
Historically the high has been magnitudes greater than the last high. But this high was about the same as the last. Maybe it is running out of steam...
Not correct. The 2017 bull run was a 17x over high in 2013 cycle. 2021 was only approx 3x.
Still at least 18 months before this cycle ends. Assuming it doesn't become a super cycle.
Interesting that because of a bitcoin event called 'halving', it now costs twice as much to mine bitcoin as it did last month. Either the price of bitcoin goes up to match, or everyone paying for their power stops mining bitcoin I guess. It doesn't appear that the price of mining has gone this much higher than the bitcoin price before.
As well publicized here, I sold 80% of mine at 70k.
I'm happy now waiting with my remaining holdings.
I actually bought small amounts on this way down, first at 63k then 57k.
This strategy worked well for me in 2022 when I sold at 42k (from a purchase price of 4k or so) and my average re-entry was around 20k
Correct. I used the Architects building contract for 2 homes, it worked very well (5 & 10 years ago)
Labour only builder (incl site management). My wife & I did the rest including subbies (agreed final say with builder).
$100/day penalty clause for completion delay
Bunning's Trade for main materials.
Paid everyone within a week of invoice
Etc
We are not at the lows of the consenting. We have a long way to go unless it becomes economic to build.
I am starting to think construction prices might take another turn up. With such low volumes coming through I don’t see the market reducing prices at all. We are going to see a lot of tradies head overseas.
I agree. And I would like to know from David, just who has said that we might have reached the bottom? An economist who never predicted more than a 10% drop?
Lots of job impacts incoming - tradies, builders, material suppliers, architects, engineers, planners, surveyors
There are still profitable builds around. Saw a place the other day where they jammed maybe 10 units on one section. The land becomes cheap when divided by 10, assuming they sell for around $700k each there is a good profit to be made. But they need to be much more savey these days I suspect.
Of course development is still potentially profitable, and a range of variables are at play. But the comment was a general one, and generally speaking the economics of residential property development generally sucks right now, and probably for at least a couple of years
Yes, I have worked with a number of Developers and Financiers over the last few years. I stopped doing it because the economics became so terrible that there simply is no point.
Look at Ockham, what are they building now? What about Westfield and all their non-shopping centre assets? Too expensive to convert. Look around, there is near nothing happening.
TBH, I can’t see this as a blip because that would require one of the inputs to unwind. Land, labour, materials or financing, and I have not seen any positive signs to suggest any of those will move downward. Nothing.
The magnitude of change required is huge. I have seen projects with “free” land stil being uneconomic. That’s the scale of the issue. It’s not a couple of percent.
Land is the least likely to move because of who owns it. Labour won’t shift because people will just go overseas. Material pricing is not competitive and financing will probably head north again as default risk gets priced and non-bank lenders disappear.
So yes, IMHO as someone that puts large scale feasibilities together we have a long way to go.
Nailed it. I also work on feasibilities for part of my livelihood.
The only thing that can offer some sort of limited salvation over the next few years will be for interest rates to come down. But the OCR will need to get down to at least 3.5% before it’s meaningful support. And probably less. And even then development will often not stack up
Thanks for the support. I don’t think people realise the scale of the event that is occurring. The impacts are going to be far reaching and the instability filters all the way down to average Joe tradie.
You could shave a couple of percent off debt but without pre-sales the big boys are dead in the water. The decision makers will keep their jobs and just scale right back to just enough to keep busy. The blue and white collar workers are stuffed.
And, while I am at it. People are going to realise soon that we don’t have a housing shortage either. With a downturn comes both departures and consolidation so IMHO this inactivity is going to further undermine house prices.
We are about to consume the medicine that we should have had in 2009. Remember Orr wants a recession and he’s probably right, we need it to reset.
Exactly. And you would shake your head - or perhaps not - at the ignorance of these things by people who *should* know better, but don’t. I am talking, in particular, about people in Treasury and policy advisors in MBIE / MHUD.
It’s pretty scary.
It’s cos they are policy generalists or textbook economists with limited on the ground understanding.
PDK. FWIW I think Oz are about 12 months behind us. They escaped a recession during the GFC because of, like you said, demand for minerals.
AU have EXACTLY the same issues as us. Land, Labour, Materials and Financing have made things uneconomic. Demand will cool and then their spiral will begin. With China and others coming off I am sure they will feel this one.
UK, Canada, all the same… this is a really unique time.
Yes agree. I’ve been watching this coming for a long time now, and finally the day of reckoning is arriving. Interest rates progressively falling until they got to zero simply postponed and amplified this reckoning. People thinking that interest rates are about to fall and save us are wrong - they are now average rather than high by medium term standards (period since GFC has all been abnormal), so won’t fall nearly as much as most think/hope. Migration will slow or reverse as unemployment rises, and people will finally realise that houses in NZ are grossly overpriced and simply unaffordable. The good news is that at least the process has finally begun.
Contact informed Transpower of commencement of commissioning of Tauhara Geothermal plant 152MW ,this is expected to take 30 days with a high probability of availability for winter 2024.Te Huka is on track to commission in late 24 which along with new wind generation and 6 new solar farms,NZ with normal hydrology should see renewable generation of mid 90's in 2025.
The Aussie Government has paved the way to once again shovel millions of taxpayer dollars to PwC. The breathtaking move comes as PwC appoints two "lobbyists" – both former very senior ALP staffers.
The Federal Government has paved the way to resume giving contracts to disgraced consultancy PwC Australia — and as soon as December — despite the much heralded “divestment” of its “government business” to Allegro Funds last year.
The Department of Finance has signed a “mutual agreement” with PwC that the consultancy giant won’t bid for any new Commonwealth work “until at least until 1 December 2024”.
The remarkable revelations, contained in a “procurement policy note” to Commonwealth departments and agencies, are despite Finance issuing PwC an open-ended “effective ban” in May last year amid the tax leaks scandal, which remains ongoing.
https://theklaxon.com.au/australian-government-paves-way-to-resume-pwc-…
It's a warzone out there people. Stay safe
https://www.stuff.co.nz/nz-news/350264529/man-bites-more-he-can-pay-tim…
Wow, such anger. You do realise how lucky we are to live in a country where this makes headline news on a National paper, that it even makes in to the national paper.
Although I do appreciate that the loss of two pies must be a significant hit to the Timaru economy.
True, just trying to lighten the mood, as it's pretty gloomy at the moment. I read the room badly, will get back to criticising the coalition of chaos.
Interesting conclusion from a panel of ex-Act, National and NZF MPs. Consensus that the coalition will not last until 2026 ...
https://www.stuff.co.nz/politics/350265554/tova-podcast-will-coalition-…
Christchurch Cathedral: the numbers don't add up.
https://offsettingbehaviour.blogspot.com/2024/04/clarifying-absurdity.h…
Lol, even Fed Farmers dislike the government’s horrid fast-track approvals bill. Ironically because it negatively impacts private property rights…
https://www.nzherald.co.nz/nz/fast-track-approvals-bill-no-one-from-fir…
🤡
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