July 6, 2024 • 41 mins
ASB has revised their OCR outlook as the economy continues to weaken due to inflationary pressures.
How has this impacted the property market? CoreLogic's Kelvin Davidson joins The Weekend Collective to discuss.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks.
It'd be.
Speaker 2 (00:14):
Mm wait sir, now with my blooding no sleep to
be screep like no, thank you both my niece feel
(00:38):
thank you please God so cool. So it's tough guy,
thank you're really rough.
Speaker 3 (00:51):
And welcome back to the Weekend Collective. I'm Tim Beverage.
And by the way, if you missed it, we actually
was quite a I would what I call it a
raucous panel was certainly good fun with Sam Wilson and
Wilhelmina Shrimpton had a great time. If you've missed any
of the previous hours, you can go and check out
the check out our podcast on the Weekend Collective. And
now the whole show is actually packaged up as one
giant podcast. Giant podcast. I'm sure that's all right, road
(01:12):
put it anyway. But anyway, now it's time for the
one roof radio show. And joining me here is I
think the expression, I think the expression the title. It's
Calvin Davidson from Core Logic and Chief Economist. I think
is the title right, isn't it? Calvin? I'm not sure
if Kelvin can hear me. Now we just need to
do a little bit of work. Okay, we've got you now.
(01:34):
Now he can't hear me yet, so we just again, right,
you've got me. Yes, Hello, how are you good?
Speaker 4 (01:43):
Good?
Speaker 3 (01:43):
How are you excellent? So just explain to us a
little bit about your role at Core Logic.
Speaker 4 (01:50):
So I'm an economist at call Logic. Call Logic, say,
property data and analytics business. So I'm in the research team.
I've got a background in economics consolancy firms and sort
of fell onto property of use over the course of
several years. And so year we talked to maybe your
lot produced reports obviously help our clients a lot as well.
So yeah, the folk spectrum.
Speaker 3 (02:12):
Hey, let's just in terms of more more economic matters
rather than the government's announcement. The ASB has revised forecast
for the OC. They've revised their forecast for the OCR
basically because we've got such a saggy economy right now,
and gosh it feels and I guess you guys track
(02:33):
property data, but you must track other economic data of course,
as far as it impinges or effects people's predictions for
interest rates and what the market's doing and stuff. But
gosh it, it just feels. I think in the last
two or three weeks, I chat to people in business,
and I don't know, maybe there's just a few anecdotal
stories that I've heard that make me feel that, crikey,
(02:53):
things are really pretty grim out there, aren't they.
Speaker 4 (02:56):
Yeah, they are. That's I've been out and about around
the country for the past couple of weeks to doing
presentations to various groups and YUS You've got to be
careful of and they're not always the full story, but
certainly at the moment, the anecdotes from the ground when
you talk to real people that the struggles are real.
People are struggling with high and mulga trans cost of living.
Your businesses are under a bit of pressure. So yeah,
(03:18):
I mean there's a big They have a sole target
of inflation, and inflation is still too high. So tricky
position for them, but I think there's probably only so
long that they can sort of ignore the real economy
because the pain is there, and the longer the real
economy stays this week will lara inflation faster than perhaps
what people are thinking. So it's a tough position. But
(03:39):
right now the economy is sernly pretty weird.
Speaker 3 (03:42):
Yeah, So it is it getting to this. I've always
felt that well, Adrian or was kind of a He's
an interesting figure because people form very strong, strong opinions
about him because of I don't know for whatever, because
of the role he holds, but i'd probably for me
it goes I think he described himself as Tana Mahota
once but anyway, not all about that. But he does
(04:02):
seem to me to have this concerned conservative approach, and
despite the pressure that he's been facing to bring the
cash right down, you get the feeling that he's I
mean even hinted that he could have put it up
last time, which was almost giving everyone the proverbial fingers,
wasn't it. But at what point do you think the
(04:24):
pressure really comes on him where he almost can't resist
a more generous approach to homeowners I could put it
that way.
Speaker 4 (04:33):
Yeah, there's a like I said, it's a tricky position
there in because central banking is a lot about credibility too,
and the problem is that inflation has been above target
for so long. It needs to be in that one
to three percent range for the Reserve Bank to retain
credibility as being good inflation fighters. So it certainly pretty
weary of cutting too early, because of course the damn
(04:53):
if they do, damn if they don't. I mean, what
if suddenly they cut the interest rate even when non
tradable or domestic inflation is still quite high, they cut
it on the back of important inflation being low. What
opens if they do that and important inflation bounces back
up again, Petrol prices shoot up, and then they're back
to square one. So's it's a pretty tricky position. Credibility
(05:14):
matters a lot. But yes, I think there's only only
only so much economic pain you can ignore in terms
of GDP, people losing jobs, that sort of thing. So yeah,
there's there's a.
Speaker 3 (05:25):
Lot moretch actually, just on the facts, because we often have,
as I mentioned, anecdotal stories. And by the way, what
your calls eight hundred eighty ten eighty text nine two
nine two on what do you think of the ASP's
predicting a bank rate? But the cash rate will be
cut by the reserve banks sooner them than they have
foreshadowed or predicted. But let's get some Let maybe get
(05:49):
some facts, because I was talking about anecdotal evidence, and
of course anecdotal evidence is fine, but what what is
the economic data at the moment as to where inflation
is at and has been in terms of context, Calvin.
Speaker 4 (06:02):
Yes, inflation the latest number I think off the top
of my is four percent. I should know that it
should have it written on my wall or something around
about their four percent mark. The target is one to
three and ideally averages two percent over the median term. Now,
I mean it's been above that three percent, the upper
end of that band for two or three years. Again,
I don't have that off the top of my head,
(06:23):
but it's been a more target for a long time,
and it peaked at more than seven percent, So yeah,
there is a it needs to get back in the box,
and the signs aren't encouraging. We're definitely seeing on sort
of near term indicators of inflation are slowing down, so
certainly an expectation and inflation will be back in target
pretty soon. But yes, there's there's a there's a lot
(06:43):
writing on this in terms of the Reserve Bank's credibility
about being inflation fighters, because that is there the number
one target now the only target since the labor market's
been taken away from their end dates. So yeah, it's
a it's a big, big game for them.
Speaker 3 (06:57):
So what's the what are the what are the elements
of inflation that you talk about non tradable and tradable.
I've keep on forgetting which is which is which. For
the time being, just explain those ones again.
Speaker 4 (07:07):
Yeah, so nonrad Now this this has become really the
sort of buzzwords and economics circles lately. It's non tradable
and tradable. It's the split between sort of domestic and important.
So you're tradeable is important stuff or goods and services
that cross borders, so things like petrol prices of the
obvious example of a tradeable good it's important, and then
(07:30):
your non tradeable is your domestic items such people use
here cuts a lot as a pretty pretty real world
example of something that can't really be traded across borders.
But also things that have been really putting pressure on
inflation on that non tradeable domestic side lately have been rents,
council rates, and insurance. And I was talking about this
with my family just earlier in the day about how
(07:50):
much those things have gone up in the past two
or three years. You know, you're talking thirty forty fifty
percent for insurance, for example. So those things are a
big problem. Now there is a school of school of
thought that is, well, the reserve band can't really control
them anyway, because things like insurance is going up because
of climate change. Now you could put the official case
rate to one hundred percent and you're not going to
(08:12):
slow down climate change. So there's a there's a there's
lots of moving parts, but non trainables domestic stuff and
trainable is important.
Speaker 3 (08:21):
So what parts of the economy, what part of what
part of it is influenceable by the Reserve Bank because
one part has been obviously they I don't know. They
aim to increase the rate of unemployment in a way
which choice feels pretty brutal. But what are the things
that what proportion of the economy does the Reserve Bank
(08:43):
actually influence when it comes to trying to get inflation down?
Speaker 4 (08:46):
Yeah, well, I mean I think you can probably says
it's almost all of it. Because keep in mind that
even them with important goods, there's the substitution thing, so
you can choose whether you take a domestic supplier or
an important product. Now things like petroy okay, maybe not
so much. But if the if the official roaders pushed
up or down, that will have an influence on domestic
(09:09):
producers and competition effect there which might force overseas importers
or to change their prices as well to compete with
the locals. So it's probably more of an indirect thing
on that side. But around the non tradable stuff, yeah,
I mean you put the official cash road up. Take
the example of a hairdresser, well, if their customers are struggling, well,
(09:31):
you might have to look at lowering your price for
a haircut. So I think you can say, either directly
or indirectly, the official cach ruate plays a big role
across almost everything, but sometimes it's played it takes a
bit longer to sort of play out. Now. The other
thing here, of course, is that there's legs in the system.
There's a score of thought that says inflation right now
(09:51):
is reflecting what the reserve bank did twelve or eighteen
months ago. So you know, there's long legs here two,
which makes it hard to judge exactly where the idea
case rates should be. So lots of moving parts. But
obviously and the reserve banks that really keep layering can
influence across the spectrum.
Speaker 2 (10:07):
Yeah.
Speaker 3 (10:07):
Actually that was one of my questions because It's like
turning a freighter around, isn't it. You can basically, you
can exercise your control over the throttle and the steering,
but it takes a while before it actually has an effect,
which make actually of course, as an economist, you look
at data and all those sorts of things, but you
have your experience as well, because inevitably, I mean, Tony
(10:30):
was aren't it famously said he never liked to make
predictions because it was a good way of finding some humility,
because they're hard to make. But do you how much
of it? When you look at it? Do you sort
of think, well, I see this, I see X, Y
and Z, I see these, I see the things starting
to move, and then you develop maybe you also have
your experience and a certain hunch on that. And I
was wanted to know what your hunch is, because I
(10:51):
worry if we're in for a bit of a harder landing,
that they've actually kept that cash right up a bit
too much for too long. But who would know?
Speaker 4 (10:58):
Yeah, I mean, certainly within cool logic and even the
economic experience I've worked in the past, nobody's really a
slag to their economic models. You know, you have spreadsheets
which tell you what the relationship's been historically, but it
only tells you historically, it doesn't necessarily tell you right now.
And of course spreadsheets can't capture human emotions, psychology, the mindset,
(11:18):
which matters hugely in business and the property market for sure,
So spreadsheets are never going to capture that. So I
think that's where and within call lodge around about a lot,
talking to different people, so I think that's where you
get the on the ground stories and sentiment really matters.
So yeah, you look at your models, but it's also
a hardsh it's experience, and I mean, I have to
(11:39):
say at the moment, I'm thinking leaning towards it earlier
official cash rate cut and later on I can certainly
see a case for them pushing through the first cut
in November, which really most commentators are thinking at the moment.
But I just think that there's only so long that
they can sort of ignore the real economy when pains
out there. And of course then we will have had
(12:00):
some pretty important data releases. We will have had third
quarter inflation number is, we will have had third quarter
unemployment numbers, so they'll really have all they need to
be pretty confident either way now, they might not cut,
but at least they'll have everything to work off. And
so I think I'm sort of thinking that that November
will be the timing. So they might just start to
signal it a little bit in advance, but perhaps not
(12:22):
too much because if they signal it too much, then
the markets might react too quickly, and they don't want
that either. So yeah, but but maybe sneaking into this
year rather.
Speaker 5 (12:30):
The next year.
Speaker 3 (12:31):
But like Joe Biden quitting, if he does, he won't
tell us beforehand. Who will still just happen? That's right,
political analogy.
Speaker 4 (12:38):
There, Yeah, And this is this is it's a the
credibility matters a lot on central banking. Often people are
reading their statements not so much for what they did say,
but sometimes what they didn't say, and that the tone
of the words was that word in and we're out.
You know, there's there's a bit of Gamesman the ship
going on too. There is there being trying to sort
of second guess the financial markets, and the markets second guess,
(13:00):
and there is their bank. So there's a you know,
what you say is sometimes just as important as what
you do.
Speaker 3 (13:06):
What do we know about the way I mean, I
want to hear from you, because the reason we're talking
about the cash rate is because for every homeowner who's
got a mortgage, that's enough to worry about, which is
probably most of us. You're making your decision when you
get the reminder from the bank, Hey, look your interest
rates due for reviewal you fixed rate, your term is
coming to it's kind of refix your rate. What call
(13:29):
are you making? Because if you think that, if you've
got a pessimistic view of things, you might be locking
in for longer. But I guess I mean you're not
going to give specific financial advice. I always just pointing
that out Calvin as a quick disclaimer. But the banks,
what they asked be saying is that you probably would
be wanting to go a bit shorter these days, wouldn't you,
unless you've got such an amazing rate.
Speaker 4 (13:51):
Yeah, that's right, and that's so no financial advice, of course.
But then is what people are doing. If you look
at month or month lending numbers, there's an overwhelming majority
of people are fixing short when they're taking out a
new line, switching banks, topping up their existing loan, fixing
short for six or twelve months. So that is what
people are doing now. It's not the easiest decision. It
(14:11):
never is because at the moment, save to six and
twelve month month interest rates are quite a bit higher
than a two your interest rates, So you're making a
bit againble on, Okay, if I fix short, I can
ride the wave down. We don't quite know when that
down and wave will start, and we don't know how
big it will be. So you're paying a premium now
(14:31):
basically to fix short in the hope that you'll save
money later. Now, tricky decision because interest rates might not
fall for a while, yet, they might not fall sharply.
It's down to the individual to decide. But certainly what
we are seeing is that people are fixing short.
Speaker 3 (14:44):
So is there a story to be told that you
could if you were just looking at the rates of
the banks that they're offering. Does that tell you what
they think is going to happen? Because my lay person's
approach would be when they have the very long term
ones looking quite a bit cheaper, it tells me they
really want you to fix because they think the short
(15:06):
term rates going to keep coming down and down and down.
Whereas it does it does it actually do the interest
rates give that indication apart from what their press release.
Speaker 4 (15:14):
Is say absolutely, yep, you've you should be a financial
market analyst. Yeah, absolutely, that's that's a way.
Speaker 6 (15:21):
Yeah.
Speaker 4 (15:22):
They call that a sort of inverted yield curve or
the longer rates being lower than the shorter rates signaling
that there's going to be a downwards track at some
point in the future. So that that is what it's saying,
which does mean it does make it tricky for people
having to make a decision because if you fix shorter,
you're paying a bit more, but hopefully you you can
(15:42):
reprice into that down wave as it comes through, So
you're never an easy decision. But that's what I guess
as we observe that in the market at the moment.
And it always takes two sides to make, you know,
to have any transact, any financial transaction, you you both
sides of those deals have to believe they're getting value,
and so it's sort of a bit of gamesmanship, but
(16:05):
gambling you you think you know more than the bank,
so you make your own decision and hopefully you win,
sometimes you don't, but it's always.
Speaker 3 (16:13):
Always it just before we head to the break, So
what what do you have actual percentages of what people
are shifting fixing for a year or more? Do we
actually know those numbers? Do you get that data from
the bank? So is it approximation?
Speaker 4 (16:27):
Yes, yeah, No, it's we get those official numbers from
the Reserve Bank each month. So at the moment, it's
about of all new loans taken out month or month,
about sixty percent of people are fixing for six or
twelve months. There's about twenty percent floating in there for
various reasons, and floating canclude and include revolving credit. These
sorts of things offset mortgages, so it's not necessarily just
(16:49):
going on the straight up floating rate. So it's about
a fifth is floating, sixty percent fixed short, which leavesf
my mass is on about twenty percent fixed for some
period longer than a year, So you're not many people
fixing beyond that that trieve ortem horizon.
Speaker 3 (17:06):
Actually, just one other question that before the break, I
keep breaking my promises on that. What about the size
of the mortgage do people tend to fix? Is there
a statistical sort of story if you've got you've just
bought your house, you're mortgaged up to the helt, are
you more likely those people more likely to go for
(17:28):
long gad is their behavior different to someone who maybe
has had fifteen years to pay it off when they're
down to something that's quite manageable and they're a little
bit more casual about it and a look, maybe oh
that they can they can take those gambles a bit more.
Speaker 4 (17:42):
Yeah, I think there's there is something in that. It's
hard to prove with the data we get, because you know,
we're looking at the data. It does show most people
are fixing short, regardless of whether it's a first time
buyer or whatever. But but yeah, anecdotally, you're talking a
lot of brokers, and that is what first time buyers
tend to do. That they value the certainty and so
(18:04):
you know, even though you might not necessarily write a
wave down in terms of restraints, if you're fixing for
two or three years, at least you know that's what
you're paying for the next two or three years. And
if you've got a big mortgage, well that that's important.
Peace of mind matters. They've got it. You know, the
sleep at night test, if you can sleep at night, yeah,
if you're doing.
Speaker 3 (18:20):
Okay, Oh my goodness, I wonder how many people pass
that test regularly. Anyway, Look, we're going to take a break.
We want your cause eight hundred and eighty ten eighty
text nine two nine two. What do you agree with
the prediction of ASB who are predicting that the Reserve
Bank will cut the OCRs sooner rather than later, and
(18:40):
that that is a result because well, the story is
out there in the economy is that people are doing
it quite tough. So maybe the pressure is coming off
in terms of having to keep that cash right up
there for so long. Our guest is Calvin Davidson. He
is chief economist at Core Logic. We'll be back in
just a moment. This is News Talks here b twenty
five past four.
Speaker 2 (19:12):
Do you lathering those a mega dance? When you're jump
with your friends? Out of body?
Speaker 1 (19:17):
What's your favorite song?
Speaker 4 (19:18):
There's a mega smile? Do you think of me?
Speaker 7 (19:21):
And when you close your eyes down there, what are
you dreaming?
Speaker 2 (19:27):
Everything on?
Speaker 3 (19:29):
And not all?
Speaker 7 (19:32):
It's been ten thousand hours, ten thousand more. If that's
what it takes to learn, that's be hard on yours
and I might never get there.
Speaker 2 (19:46):
I'm going side.
Speaker 7 (19:48):
It's two thousand hours of rest.
Speaker 3 (19:53):
And welcome back to the Weekend Collective. I'mpton Beverage. It's
twenty nine past four News Talks. It'd be we're talking
with Kevin Davidson. He's economist from Core Logic, just about
the cash right and the ASB predicting that the Reserve
Bank will actually cut it sooner rather than later. A
few texts here just before we because we've got some
other things we're gonna have chat about as well. But
you can give us a call on eight hundred eighty
(20:14):
ten Eightykevin. Just a mechanics question for you guys as
a private company that somebody's just asking, where do you
get housing sale data and all that sort of stuff?
How does it all work in terms of data? I
guess it's available to anyone who wants it, doesn't it.
Speaker 4 (20:31):
Well, well more or less? Yeah. I mean there's there's
two main sources that comes in from councils basically, and
also we have a what's called a recent sales capture
program where you're pretty much just tapping any source you can,
ringing estate agents byre submitting their own deals. So it's
either those official channels through council records coming back in
(20:52):
or else those agents. So I mean basically anyway you
can as the simple answer. So in your property information
it is it is public information. Your name goes on
a title, you can look up who own what property,
you know, what they paid, all of these things. So
it sometimes feels a little bit of fit, a little
bit grayer read like you're almost snooping on people. But
(21:14):
proper information is in the public public domain, so yeah,
it's up for everyone to see.
Speaker 3 (21:20):
And mind you, the analysis is not that straightforward. Of course,
there's a lot of data out there, which is where
you guys come in.
Speaker 4 (21:26):
That's right, yeah, And I mean one thing I find
myself saying this a lot to people lately is that
as an economist, as an analyst people presenting into other people,
you you sort of have to use averages. There's no
other way around it. We can't talk about every single sale.
It just doesn't make any sense. But at the same
time you have to have a degree of sort of
(21:48):
humility that nobody buys the average and people buy an
individual property on an individual street with their own financing arrangements,
their own sort.
Speaker 3 (21:57):
Oh, I think we've just watched.
Speaker 4 (21:59):
Two high level and too low level, and there's somewhere
in between. As a happy menion.
Speaker 3 (22:04):
Okay, just a couple of texts here, Tim, It's absolutely
grim out there. It's worst I've seen in fifteen years
in the building industry. And getting two calls a day
from billers and other trades looking for work in Auckland.
I've never had this before. It's very real, and even
dropping registrates to five percent way and much effect because
a lot of the issues are structural, says Steve Is
that Calvin an example of certain industries are like the
(22:27):
Canary and the mine.
Speaker 6 (22:30):
Yeah.
Speaker 4 (22:30):
Well, I mean, construction has been in a downturn for
probably about two years now, and there it came off
at a very high level. So in a long run context,
construction is actually sort of about back where you might
call it normal. But that doesn't make it any easier
for people out there on the ground. And certainly there
are a lot of struggles in that construction industry for sure,
but it's not the only industry. We're starting to see
(22:51):
things like manufacturing looking pretty weak. Retail spending has been
weak for a while. So yeah, there's no hiding the pain.
I mean it sounds crass or crude or whatever, but
this is monetary policy and action. This is what my
untary policy is supposed to do. The Reserve Band has
talked about engineering and recession. This is sort of what
they felt they needed to squeeze inflation out, you get
(23:14):
some job losses, you squeeze some industries, and that's what
we're what we're seeing. I suppose now. I do think
there is a pretty strongly grown risks they hang on
too long and actually those rate cards might need to
come through sooner. So that's what we're all kind of
waiting for, I guess, but certainly no fun hearing those
stories that. On the other hand, it is monetary policy
(23:34):
playing out.
Speaker 3 (23:35):
What are the opportunity So when's the next when are
the next two or three cash right announcements? What's the
what's the schedule for that.
Speaker 4 (23:43):
We've got one very soon and in fact coming up
this week on Wednesday, they're going to make an announcement.
Now that's sort of an interim mine. They call it
a monetary policy review, which is a short one. It
doesn't have any associated forecasts or detailed analysis. I suspect
this will be pretty short. It'll just be towing the
same line that we're not changing the official care shrame.
We're still concerned about inflation else to see here.
Speaker 3 (24:06):
This is where the words all matter, won't it. It won't
be people be dissecting every little bit of Shakespearean reference
or whatever.
Speaker 4 (24:13):
That's right. Yeah, words are going to be very important
in this one. I suspect this one might come and
go fairly quickly, but the next one, which is in
mid August, will be a full monetary policy statement. That's
where I suspect they might just start to lay the
groundwork for that November eight cut. You might start to
see where it's like, you know, I'm not exactly sure
what they might be, but inflation close to target and
(24:36):
we may not need to keep monetary policy as restrictive
for as long. Yeah, those sorts of phrases which might
sound pretty vague to people, but it's a signaling thing,
and it's a bit of gamesmanship with financial markets. I
think their language might stay pretty much the same in
this next decision in a few days time, get to
middle of August, that's where it might start to soften
(24:56):
just a little bit. So that's my expectation.
Speaker 3 (24:58):
I've actually forgotten what the ASB said. Did they say
they were just talking about the end of the year
or they think it's going to happen sooner than that.
I think it's I think it's November, isn't it.
Speaker 4 (25:07):
Yeah, November there's the last monetary policy stayment, the last
opportunity to make a call on the official cash readers
November and then they take It's a three month break
I think over Christmas through to the next decision February.
So it's probably another factor to just keep in mind
that they won't have another opportunity after November until February.
Now do they want to leave it on hold for
that long over that period where people could continue to struggle?
(25:30):
So so I think went for November, and it's sort
of where I'm going.
Speaker 3 (25:35):
No chance of August is there?
Speaker 6 (25:37):
Is there? No?
Speaker 4 (25:40):
I mean that would be a surprise now. I mean
Adrian Oren and Reserve being under his leadership, have surprised
us before, to be fair.
Speaker 3 (25:49):
So poor Park. That's that's his motives, that's his operating playbook,
isn't it? You know, be predictable? Hey bango, there we
go twenty five off.
Speaker 4 (25:57):
Yeah, I heard during the week. I think somebody like
Ravo Bank might be still clinging to that sort of
view that there could be a rate cut in August. Now,
it would be a big surprise, to be honest, it
would be a very big surprise. But maybe that's you know,
that's that would would shot people when I would give
people that little bit of a little bit of sugar
rush that they might need. Perhaps, So who knows. I
(26:18):
think it's a it's a low probability.
Speaker 3 (26:19):
But I'm going to remember this conversation Calvin when in August.
I'll be like, I must get a hold of your
number and tweet you're saying, told you so, not that
I did tell you anything. Actually I never.
Speaker 4 (26:31):
I'd never I'd never commit to anything. I never commit
to anything on zero percent or one hundred percent. You know,
you always give yourself a.
Speaker 3 (26:36):
Little oh exactly. Yeah, not many economists would would would
would breach that rule. Anyway, Hey, look we're going to
take a break. We also want to have a quick
chat after the break about the government's planning announcement. There's
a big shake up for property. It's continuing in essence
many of the things that Labor were talking about, but
basically they were removed that people are the one worry
maybe people have was well, maybe more than one worry.
(26:59):
But will it lead to tiny houses and balconies and
all that sort of stuff. Or is it just we
need to get property is built and we need to
open up the rules and lected to skip cracking. It
is twenty four minutes to five News Talk SEDB. According
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right with Kelvin Davidson CA core logic. The other thing
I want to get your take on, Calvin. I guess
it'd be fair enough to ask you from an economists perspective,
(28:28):
although as a key we as well with you'd have
your own opinions about it. But the announcement from Chris
Bishop revealing the housing planning changes for new homes the
thing that stood out to me. They're getting rid of
the minimum floy area in balcony requirements for apartments, which
did make me clench a bit. But is there an
economists point of view that can just make us feel
(28:49):
a little bit more relaxed. Yeah, what's your take on
the announcement? Were you surprised by it as well?
Speaker 4 (28:56):
I mean not so much surprise, and that they've signaled
for a long time that they want to flood the
market with land, as they've called it. And this was
prele and you're probably going back sort of tide eighteen
months even even prior to that, So it's been well
signal that they want to really look at the housing
market and really try and get housing supply up. Now
you sort of have to take it with a little
(29:17):
bit of caution because we know, over several different governments
of both different colors, that we haven't had the housing
supply we need, perhaps and we've got a housing affordability problem.
So I suppose that history is in the back of
your mind. But I mean, I look at these changes
and I think, honestly, if we're ever going to change
things around, it seems like now could be the time,
(29:38):
and that some of these changes are pretty wide ranging.
It's not just the apartment thing. They've talked about opening up,
insuring councils are planning for thirty years of land supply
and softening boundaries around rural and urban so intensifying around
transport hubs and using brownfield land, but also greenfield land.
Speaker 3 (29:58):
They hold it brownfield greenfield, which is which what are they?
Speaker 4 (30:03):
Brownfield's your land that you've already used in some shape.
Greenfield's you knew sort of on city fringes, So both
types of development. That The problem with greenfield, of course
is that you need some infrastructure to get there, and
that's that can be a bit of a problem sometimes,
But there's also that making it easy to get imported
building materials in Greenny flats and something that's been talked
(30:25):
about in the past couple of weeks too. So it's
a wide ranging set of changes, and like I say,
you've got to be you've got to be pretty optimistic
that if we're ever going to make a change, well
now is as good a time as any. So you
don't have to keep that history in mind. But but
I feel pretty optimistic. Infrastructure is a big part of it.
You need to It's okay, very well opening up farmland
(30:47):
for new housing, but it's ensuring that the roads are there,
the powers there, the waters there that I think that's
still a bit of a hurdle. So hopefully we can
get over there.
Speaker 3 (30:56):
I mean, I'm yeah, because there are some obligations on
developers that they have to provide. You just can't bang
up a set of flats or something without providing certain
other like they want super much. You know, if it's
a big enough development, I think you need to provide
retail space and all that sort of stuff, which actually
is that's a reasonable hoop for developer stuff to jump through,
isn't it.
Speaker 4 (31:16):
That's right. Yeah, I think it's all wrapped up in
what I understand to be development contributions that developer will
make to those services that are essential and opening up
the land. You're talking about broadband and roading and pipes
and all of these sorts of things. So it's not
an overnight fix. Of course, that these things will take time,
and of course the big problem, I guess with analysis
(31:37):
of these things, you never know the counterfacture. You don't
know what would have happened twenty years down the track
if we didn't have these changes. It's always hard to number.
So but I'm optimistic. I'm hopeful that we can fix
the problem because affordability is a big challenge. And it's
not just affordability, it's the quality of housing, it's our
state housing wait list, all of these things. I think
(31:58):
there's a massive acceptance that something needs to change. So yeah,
I guess let's get them binded and hope it works out.
Speaker 3 (32:05):
Do you worry about the minimum sort of size requirements
being gone. I mean, we can all imagine the worst
sort of development that we don't want to see, But
then again, I can also imagine the reasons that you
would want to provide that option for people who are
you know, especially for student accommodation things like that, and
people want to buy a bunch of small apartments to
rent them out to students or whoever. But do you
(32:25):
worry about those minimum size requirements being gone or do
you think the market looks after that. By the way,
you can give us a call on that if you're
like one hundred and eighty ten eighty. But what do
you think, Galvin?
Speaker 4 (32:33):
Yeah, I don't necessarily have a big problem with reducing
sizes or or reducing taking away that minimum. I think
the market will probably decide. I think the thing that
everyone wants to see, regardless of size is quality. You know,
you want something that's of a decent build standard and
as nice and warm and function. I think that's probably
the big effect, rather than necessarily of the size. And you
(32:55):
go around lots of different countries in the world and
there's people living in fairly small spaces. Now, obviously everyone
would like the big mansion, but that's not a reality.
So I think as long as you provide spectrum of
housing in the right places, of the right standard, I
think that's probably the better goal.
Speaker 3 (33:13):
I hadn't worked at ma answer to this, because I
can imagine living in a tiny space of us on
living in the heart of Paris, but Hey, I'm in
the heart of Paris. If I'm at the top of
Queen Street, I'm not sure. I'm sure. I'm quite feeling
is enamored with my accommodation. And that sounds a bit well,
it is what it is, isn't it.
Speaker 4 (33:32):
You change your expectations shift, I guess. I mean I
lived in London in a sort of thirty square meter
and at the moment I think my garage is probably
bigger than that right now. So you know, your perspectives change.
Thirty square meters it was great for that time in
my life. So I think it's providing, you know, a
spectrum of housing, a different range of prices for housing,
(33:54):
and as long as it's of high standard, I think
that's that's probably the thing that matters most.
Speaker 3 (34:00):
Actually, I did say a cartoon by Actually I mentioned
this in just a moment. Actually, we're going to call
go to and so hang on stand by for a second.
Catherine high Hi.
Speaker 5 (34:11):
It's a question for Calvin whether he's coming across increasing
numbers of limbs that have indicating that those properties are
likely to be you know what we call managed retreated
or coastal areas. I'm just hearing you know, the situation
(34:31):
up in Capity which is causing a lot of clients
alarm that coastal regions are going to be forced to
leave the land and moved into the city, the.
Speaker 3 (34:40):
Managed retreat sort of scenario.
Speaker 5 (34:42):
Yeah, so christ Church City Council has climate adaption plans
and I think they've got you know, several billion dollars
to move people or you know, in the in the
name of climate alarm.
Speaker 3 (34:55):
What do you reckon? Calvin?
Speaker 4 (34:57):
Yeah, I mean I must have been. I don't look
at that level of granularity too much and from day
to day in my job, but certainly there's a lot
of bigger picture conversations around climate change, around flooding, all
of these things. I think it's sort of the next
really big theme in the property market in terms of pricing.
You know, our people prepared or are they willing From
(35:20):
a seller's perspective, are you willing to sell for a
bit less if you've if you've got a property that's
marked down, is at risk? Our buyers willing to pay
the prices sellers want. I think there's a really big
issue there, and insurance is obviously a keep part of
it too. Insurance insurance available what's the compt So don't
look at individual limbs. But there's a big, big issue
(35:40):
out there in terms of that that.
Speaker 3 (35:42):
Whole climate change. Okay, right, let's go to Steve.
Speaker 6 (35:46):
Get Yeah, good eight. Look on in the architectural industry,
building industry, and I think it's not a great thing
taking off these moments or areas. I think it's very,
very nig to think the market is going to keep
these floor areas up because people aren't going to buy
(36:09):
anything it's twenty five square meters. It's simply not the case.
Because New Zealand we traditionally go into a supply problem
and then people just want a roof over their heads.
Developers will go for the low hanging fruit and they'll
look at in a city and this is what this
(36:29):
is sort of designed for in a city department living,
isn't it. And they'll pack in as many as I
can because I've worked around that, and you're given that
mandate by developers to pack as many as you can.
And look, this whole thing is just being comfortable just
because it's new and you got a nice kitchen. If
you're only one point five meters across, those walls are
(36:51):
going to come closing and very quickly, and if you
don't have the amenity around you. And when you talk
about the small places around the world, that's all well
and good. In Hong Kong and Singapore, when you can
step take the elevator down into basically an extension of
your living room, aren't you You've got everything right there
at your fingertips. So that's not the case here and
it probably won't be for probably another three hundred years. Right,
(37:12):
So we live differently. People live more in isolation, so
they probably need the walls to be a little bit
wider apart on housing New Zealand thing, right, do you
know how they could fix that too? There's not enough
creative thinking. Why don't they have a two tier system,
because it's quite obvious that everybody, a large proportion of
these housing the New Zealand tennants have mental health issues
(37:33):
and the Kasai asylums, let's face it, why don't they
have these sell up all the inner city Auckland inner
city places, move out the rural areas right, grab big
chunks of land, cheaper, build them all together, have twenty
four hour security to monitor these people, and then have
another tier where you've got the ones that aren't antisocial, right,
who are working, paying the bills and they get to
(37:54):
live further closer in the single dwellings and then they
step up into the private sector. We need to break
it up. You can't just have this.
Speaker 3 (38:05):
I think that's a problem. Yeah, and now thanks for
of course, Steve. I appreciate that. Hey, look, we do
have to go to a break. It's ten to five
news Talk ZB and welcome back to the One Roof
radio show. I'm Tim Beverage. It is just coming up
to six minutes to five.
Speaker 1 (38:26):
The one roof Property of the Week on the Weekend Collective.
Speaker 3 (38:30):
And the one roof Property of the Week. Oh my word,
I say that all the time, don't because I guess
that's why we have a Property of the week, because
they're all spectacular. Calvin, by the way, I think we
might have emailed it through to you if you want
to check it out. But it is a four bedroom,
three bathroom, three car garage on it's seventy six Cliff Road,
(38:50):
Tor Bay. It's okay, it's not first time byars territory
unless you've just won the lottery. It's valued at ten
and a half million dollars. It's an iconic cliff top
residence captures an astonishing two hundred and seventy degree ocean
panorama reaching across the Funga prior to rang Atoto Island.
Five hundred and fifty square meters are home. So not
(39:12):
going to court, not exactly on the minimal side of things,
in a homage to unique Japanese style and traditions, on
a three and fifties meat square meter section. It's got
a twenty five meter lapool. The bathrooms are generous. The
thing that stands up to it for me and I
would seriously go and have a look. It's a beautiful property.
(39:33):
Seventy six Cliff Road. I think I'd spend half the
day in the bathroom. It's just got one of those bathrooms.
Is no curtains or anything, no shades, It's just glass
looking out to this magnificent view. I don't know if
you've managed to bring that up on your screen there, Calvin,
I'm not sure if you're looking at.
Speaker 4 (39:49):
The proper I've checked it out. I mean it's a
sort of property. I don't really like to look at
it most of the time because it just makes you jealous,
doesn't it prefer not to I've been watching the firms
Spencer's Best New Zealand Homes or something, and it's a
sort of property that we belong on. That just yeah,
a starter, But I mean, in my situation, my kids
are still wake in the middle of the night. You've
(40:10):
still going to love your real life, don't you.
Speaker 3 (40:12):
So you could set them further away so you don't
hear them, that's right, Hey, Calvin, amazing, Yeah, Calvin, Hey,
thanks so much for the time of the show. Now
core Logic. Now, look, you provide a range of services
to a whole a bunch of professions as well, but
people can access some of the data and the reports
and the newsletters that you provide. How can how can
(40:33):
they check out the work you do it core Logic.
Speaker 4 (40:35):
Yeah, call Logic dot co dot ins to probably be
the best start in terms of the research output, and
that gives people. The idea is to really give people
a flavor of the information we have and like you say,
across a wide range of industries to the banking's part
of it, but insurance, real estate, government, construction, the whole gamut.
Really we get to a lot of geographical information systems, mapping, addressing.
(40:57):
So yeah, call logic dot Co donions to be the.
Speaker 3 (41:00):
Starting point subtitle. It's the whole shebang on property that's
just my own. By the way, hey Kelvin, thanks so
much for your time this afternoon, and really appreciate it.
Speaker 4 (41:09):
No worries.
Speaker 3 (41:10):
Okay, cheerio and we'll be back shortly. The Parents Squad's next.
John Cowen has he's here already. He's brought me a
cup of tea. We're raring to go on The Parents Squad,
which is coming up shortly. It's three and a half
and don't forget we're also going to be rapping sport
or previewing the All Blacks match shortly before we finished
the show, it's three and a half minutes to five.
Speaker 1 (41:34):
For more from the Weekend Collective, listen live to news
Talks it'd be weekends from three pm, or follow the
podcast on iHeartRadio.
You're listening to the Weekend Collective podcast from News Talks.
It'd be.
Speaker 2 (00:14):
Mm wait sir, now with my blooding no sleep to
be screep like no, thank you both my niece feel
(00:38):
thank you please God so cool. So it's tough guy,
thank you're really rough.
Speaker 3 (00:51):
And welcome back to the Weekend Collective. I'm Tim Beverage.
And by the way, if you missed it, we actually
was quite a I would what I call it a
raucous panel was certainly good fun with Sam Wilson and
Wilhelmina Shrimpton had a great time. If you've missed any
of the previous hours, you can go and check out
the check out our podcast on the Weekend Collective. And
now the whole show is actually packaged up as one
giant podcast. Giant podcast. I'm sure that's all right, road
(01:12):
put it anyway. But anyway, now it's time for the
one roof radio show. And joining me here is I
think the expression, I think the expression the title. It's
Calvin Davidson from Core Logic and Chief Economist. I think
is the title right, isn't it? Calvin? I'm not sure
if Kelvin can hear me. Now we just need to
do a little bit of work. Okay, we've got you now.
(01:34):
Now he can't hear me yet, so we just again, right,
you've got me. Yes, Hello, how are you good?
Speaker 4 (01:43):
Good?
Speaker 3 (01:43):
How are you excellent? So just explain to us a
little bit about your role at Core Logic.
Speaker 4 (01:50):
So I'm an economist at call Logic. Call Logic, say,
property data and analytics business. So I'm in the research team.
I've got a background in economics consolancy firms and sort
of fell onto property of use over the course of
several years. And so year we talked to maybe your
lot produced reports obviously help our clients a lot as well.
So yeah, the folk spectrum.
Speaker 3 (02:12):
Hey, let's just in terms of more more economic matters
rather than the government's announcement. The ASB has revised forecast
for the OC. They've revised their forecast for the OCR
basically because we've got such a saggy economy right now,
and gosh it feels and I guess you guys track
(02:33):
property data, but you must track other economic data of course,
as far as it impinges or effects people's predictions for
interest rates and what the market's doing and stuff. But
gosh it, it just feels. I think in the last
two or three weeks, I chat to people in business,
and I don't know, maybe there's just a few anecdotal
stories that I've heard that make me feel that, crikey,
(02:53):
things are really pretty grim out there, aren't they.
Speaker 4 (02:56):
Yeah, they are. That's I've been out and about around
the country for the past couple of weeks to doing
presentations to various groups and YUS You've got to be
careful of and they're not always the full story, but
certainly at the moment, the anecdotes from the ground when
you talk to real people that the struggles are real.
People are struggling with high and mulga trans cost of living.
Your businesses are under a bit of pressure. So yeah,
(03:18):
I mean there's a big They have a sole target
of inflation, and inflation is still too high. So tricky
position for them, but I think there's probably only so
long that they can sort of ignore the real economy
because the pain is there, and the longer the real
economy stays this week will lara inflation faster than perhaps
what people are thinking. So it's a tough position. But
(03:39):
right now the economy is sernly pretty weird.
Speaker 3 (03:42):
Yeah, So it is it getting to this. I've always
felt that well, Adrian or was kind of a He's
an interesting figure because people form very strong, strong opinions
about him because of I don't know for whatever, because
of the role he holds, but i'd probably for me
it goes I think he described himself as Tana Mahota
once but anyway, not all about that. But he does
(04:02):
seem to me to have this concerned conservative approach, and
despite the pressure that he's been facing to bring the
cash right down, you get the feeling that he's I
mean even hinted that he could have put it up
last time, which was almost giving everyone the proverbial fingers,
wasn't it. But at what point do you think the
(04:24):
pressure really comes on him where he almost can't resist
a more generous approach to homeowners I could put it
that way.
Speaker 4 (04:33):
Yeah, there's a like I said, it's a tricky position
there in because central banking is a lot about credibility too,
and the problem is that inflation has been above target
for so long. It needs to be in that one
to three percent range for the Reserve Bank to retain
credibility as being good inflation fighters. So it certainly pretty
weary of cutting too early, because of course the damn
(04:53):
if they do, damn if they don't. I mean, what
if suddenly they cut the interest rate even when non
tradable or domestic inflation is still quite high, they cut
it on the back of important inflation being low. What
opens if they do that and important inflation bounces back
up again, Petrol prices shoot up, and then they're back
to square one. So's it's a pretty tricky position. Credibility
(05:14):
matters a lot. But yes, I think there's only only
only so much economic pain you can ignore in terms
of GDP, people losing jobs, that sort of thing. So yeah,
there's there's a.
Speaker 3 (05:25):
Lot moretch actually, just on the facts, because we often have,
as I mentioned, anecdotal stories. And by the way, what
your calls eight hundred eighty ten eighty text nine two
nine two on what do you think of the ASP's
predicting a bank rate? But the cash rate will be
cut by the reserve banks sooner them than they have
foreshadowed or predicted. But let's get some Let maybe get
(05:49):
some facts, because I was talking about anecdotal evidence, and
of course anecdotal evidence is fine, but what what is
the economic data at the moment as to where inflation
is at and has been in terms of context, Calvin.
Speaker 4 (06:02):
Yes, inflation the latest number I think off the top
of my is four percent. I should know that it
should have it written on my wall or something around
about their four percent mark. The target is one to
three and ideally averages two percent over the median term. Now,
I mean it's been above that three percent, the upper
end of that band for two or three years. Again,
I don't have that off the top of my head,
(06:23):
but it's been a more target for a long time,
and it peaked at more than seven percent, So yeah,
there is a it needs to get back in the box,
and the signs aren't encouraging. We're definitely seeing on sort
of near term indicators of inflation are slowing down, so
certainly an expectation and inflation will be back in target
pretty soon. But yes, there's there's a there's a lot
(06:43):
writing on this in terms of the Reserve Bank's credibility
about being inflation fighters, because that is there the number
one target now the only target since the labor market's
been taken away from their end dates. So yeah, it's
a it's a big, big game for them.
Speaker 3 (06:57):
So what's the what are the what are the elements
of inflation that you talk about non tradable and tradable.
I've keep on forgetting which is which is which. For
the time being, just explain those ones again.
Speaker 4 (07:07):
Yeah, so nonrad Now this this has become really the
sort of buzzwords and economics circles lately. It's non tradable
and tradable. It's the split between sort of domestic and important.
So you're tradeable is important stuff or goods and services
that cross borders, so things like petrol prices of the
obvious example of a tradeable good it's important, and then
(07:30):
your non tradeable is your domestic items such people use
here cuts a lot as a pretty pretty real world
example of something that can't really be traded across borders.
But also things that have been really putting pressure on
inflation on that non tradeable domestic side lately have been rents,
council rates, and insurance. And I was talking about this
with my family just earlier in the day about how
(07:50):
much those things have gone up in the past two
or three years. You know, you're talking thirty forty fifty
percent for insurance, for example. So those things are a
big problem. Now there is a school of school of
thought that is, well, the reserve band can't really control
them anyway, because things like insurance is going up because
of climate change. Now you could put the official case
rate to one hundred percent and you're not going to
(08:12):
slow down climate change. So there's a there's a there's
lots of moving parts, but non trainables domestic stuff and
trainable is important.
Speaker 3 (08:21):
So what parts of the economy, what part of what
part of it is influenceable by the Reserve Bank because
one part has been obviously they I don't know. They
aim to increase the rate of unemployment in a way
which choice feels pretty brutal. But what are the things
that what proportion of the economy does the Reserve Bank
(08:43):
actually influence when it comes to trying to get inflation down?
Speaker 4 (08:46):
Yeah, well, I mean I think you can probably says
it's almost all of it. Because keep in mind that
even them with important goods, there's the substitution thing, so
you can choose whether you take a domestic supplier or
an important product. Now things like petroy okay, maybe not
so much. But if the if the official roaders pushed
up or down, that will have an influence on domestic
(09:09):
producers and competition effect there which might force overseas importers
or to change their prices as well to compete with
the locals. So it's probably more of an indirect thing
on that side. But around the non tradable stuff, yeah,
I mean you put the official cash road up. Take
the example of a hairdresser, well, if their customers are struggling, well,
(09:31):
you might have to look at lowering your price for
a haircut. So I think you can say, either directly
or indirectly, the official cach ruate plays a big role
across almost everything, but sometimes it's played it takes a
bit longer to sort of play out. Now. The other
thing here, of course, is that there's legs in the system.
There's a score of thought that says inflation right now
(09:51):
is reflecting what the reserve bank did twelve or eighteen
months ago. So you know, there's long legs here two,
which makes it hard to judge exactly where the idea
case rates should be. So lots of moving parts. But
obviously and the reserve banks that really keep layering can
influence across the spectrum.
Speaker 2 (10:07):
Yeah.
Speaker 3 (10:07):
Actually that was one of my questions because It's like
turning a freighter around, isn't it. You can basically, you
can exercise your control over the throttle and the steering,
but it takes a while before it actually has an effect,
which make actually of course, as an economist, you look
at data and all those sorts of things, but you
have your experience as well, because inevitably, I mean, Tony
(10:30):
was aren't it famously said he never liked to make
predictions because it was a good way of finding some humility,
because they're hard to make. But do you how much
of it? When you look at it? Do you sort
of think, well, I see this, I see X, Y
and Z, I see these, I see the things starting
to move, and then you develop maybe you also have
your experience and a certain hunch on that. And I
was wanted to know what your hunch is, because I
(10:51):
worry if we're in for a bit of a harder landing,
that they've actually kept that cash right up a bit
too much for too long. But who would know?
Speaker 4 (10:58):
Yeah, I mean, certainly within cool logic and even the
economic experience I've worked in the past, nobody's really a
slag to their economic models. You know, you have spreadsheets
which tell you what the relationship's been historically, but it
only tells you historically, it doesn't necessarily tell you right now.
And of course spreadsheets can't capture human emotions, psychology, the mindset,
(11:18):
which matters hugely in business and the property market for sure,
So spreadsheets are never going to capture that. So I
think that's where and within call lodge around about a lot,
talking to different people, so I think that's where you
get the on the ground stories and sentiment really matters.
So yeah, you look at your models, but it's also
a hardsh it's experience, and I mean, I have to
(11:39):
say at the moment, I'm thinking leaning towards it earlier
official cash rate cut and later on I can certainly
see a case for them pushing through the first cut
in November, which really most commentators are thinking at the moment.
But I just think that there's only so long that
they can sort of ignore the real economy when pains
out there. And of course then we will have had
(12:00):
some pretty important data releases. We will have had third
quarter inflation number is, we will have had third quarter
unemployment numbers, so they'll really have all they need to
be pretty confident either way now, they might not cut,
but at least they'll have everything to work off. And
so I think I'm sort of thinking that that November
will be the timing. So they might just start to
signal it a little bit in advance, but perhaps not
(12:22):
too much because if they signal it too much, then
the markets might react too quickly, and they don't want
that either. So yeah, but but maybe sneaking into this
year rather.
Speaker 5 (12:30):
The next year.
Speaker 3 (12:31):
But like Joe Biden quitting, if he does, he won't
tell us beforehand. Who will still just happen? That's right,
political analogy.
Speaker 4 (12:38):
There, Yeah, And this is this is it's a the
credibility matters a lot on central banking. Often people are
reading their statements not so much for what they did say,
but sometimes what they didn't say, and that the tone
of the words was that word in and we're out.
You know, there's there's a bit of Gamesman the ship
going on too. There is there being trying to sort
of second guess the financial markets, and the markets second guess,
(13:00):
and there is their bank. So there's a you know,
what you say is sometimes just as important as what
you do.
Speaker 3 (13:06):
What do we know about the way I mean, I
want to hear from you, because the reason we're talking
about the cash rate is because for every homeowner who's
got a mortgage, that's enough to worry about, which is
probably most of us. You're making your decision when you
get the reminder from the bank, Hey, look your interest
rates due for reviewal you fixed rate, your term is
coming to it's kind of refix your rate. What call
(13:29):
are you making? Because if you think that, if you've
got a pessimistic view of things, you might be locking
in for longer. But I guess I mean you're not
going to give specific financial advice. I always just pointing
that out Calvin as a quick disclaimer. But the banks,
what they asked be saying is that you probably would
be wanting to go a bit shorter these days, wouldn't you,
unless you've got such an amazing rate.
Speaker 4 (13:51):
Yeah, that's right, and that's so no financial advice, of course.
But then is what people are doing. If you look
at month or month lending numbers, there's an overwhelming majority
of people are fixing short when they're taking out a
new line, switching banks, topping up their existing loan, fixing
short for six or twelve months. So that is what
people are doing now. It's not the easiest decision. It
(14:11):
never is because at the moment, save to six and
twelve month month interest rates are quite a bit higher
than a two your interest rates, So you're making a
bit againble on, Okay, if I fix short, I can
ride the wave down. We don't quite know when that
down and wave will start, and we don't know how
big it will be. So you're paying a premium now
(14:31):
basically to fix short in the hope that you'll save
money later. Now, tricky decision because interest rates might not
fall for a while, yet, they might not fall sharply.
It's down to the individual to decide. But certainly what
we are seeing is that people are fixing short.
Speaker 3 (14:44):
So is there a story to be told that you
could if you were just looking at the rates of
the banks that they're offering. Does that tell you what
they think is going to happen? Because my lay person's
approach would be when they have the very long term
ones looking quite a bit cheaper, it tells me they
really want you to fix because they think the short
(15:06):
term rates going to keep coming down and down and down.
Whereas it does it does it actually do the interest
rates give that indication apart from what their press release.
Speaker 4 (15:14):
Is say absolutely, yep, you've you should be a financial
market analyst. Yeah, absolutely, that's that's a way.
Speaker 6 (15:21):
Yeah.
Speaker 4 (15:22):
They call that a sort of inverted yield curve or
the longer rates being lower than the shorter rates signaling
that there's going to be a downwards track at some
point in the future. So that that is what it's saying,
which does mean it does make it tricky for people
having to make a decision because if you fix shorter,
you're paying a bit more, but hopefully you you can
(15:42):
reprice into that down wave as it comes through, So
you're never an easy decision. But that's what I guess
as we observe that in the market at the moment.
And it always takes two sides to make, you know,
to have any transact, any financial transaction, you you both
sides of those deals have to believe they're getting value,
and so it's sort of a bit of gamesmanship, but
(16:05):
gambling you you think you know more than the bank,
so you make your own decision and hopefully you win,
sometimes you don't, but it's always.
Speaker 3 (16:13):
Always it just before we head to the break, So
what what do you have actual percentages of what people
are shifting fixing for a year or more? Do we
actually know those numbers? Do you get that data from
the bank? So is it approximation?
Speaker 4 (16:27):
Yes, yeah, No, it's we get those official numbers from
the Reserve Bank each month. So at the moment, it's
about of all new loans taken out month or month,
about sixty percent of people are fixing for six or
twelve months. There's about twenty percent floating in there for
various reasons, and floating canclude and include revolving credit. These
sorts of things offset mortgages, so it's not necessarily just
(16:49):
going on the straight up floating rate. So it's about
a fifth is floating, sixty percent fixed short, which leavesf
my mass is on about twenty percent fixed for some
period longer than a year, So you're not many people
fixing beyond that that trieve ortem horizon.
Speaker 3 (17:06):
Actually, just one other question that before the break, I
keep breaking my promises on that. What about the size
of the mortgage do people tend to fix? Is there
a statistical sort of story if you've got you've just
bought your house, you're mortgaged up to the helt, are
you more likely those people more likely to go for
(17:28):
long gad is their behavior different to someone who maybe
has had fifteen years to pay it off when they're
down to something that's quite manageable and they're a little
bit more casual about it and a look, maybe oh
that they can they can take those gambles a bit more.
Speaker 4 (17:42):
Yeah, I think there's there is something in that. It's
hard to prove with the data we get, because you know,
we're looking at the data. It does show most people
are fixing short, regardless of whether it's a first time
buyer or whatever. But but yeah, anecdotally, you're talking a
lot of brokers, and that is what first time buyers
tend to do. That they value the certainty and so
(18:04):
you know, even though you might not necessarily write a
wave down in terms of restraints, if you're fixing for
two or three years, at least you know that's what
you're paying for the next two or three years. And
if you've got a big mortgage, well that that's important.
Peace of mind matters. They've got it. You know, the
sleep at night test, if you can sleep at night, yeah,
if you're doing.
Speaker 3 (18:20):
Okay, Oh my goodness, I wonder how many people pass
that test regularly. Anyway, Look, we're going to take a break.
We want your cause eight hundred and eighty ten eighty
text nine two nine two. What do you agree with
the prediction of ASB who are predicting that the Reserve
Bank will cut the OCRs sooner rather than later, and
(18:40):
that that is a result because well, the story is
out there in the economy is that people are doing
it quite tough. So maybe the pressure is coming off
in terms of having to keep that cash right up
there for so long. Our guest is Calvin Davidson. He
is chief economist at Core Logic. We'll be back in
just a moment. This is News Talks here b twenty
five past four.
Speaker 2 (19:12):
Do you lathering those a mega dance? When you're jump
with your friends? Out of body?
Speaker 1 (19:17):
What's your favorite song?
Speaker 4 (19:18):
There's a mega smile? Do you think of me?
Speaker 7 (19:21):
And when you close your eyes down there, what are
you dreaming?
Speaker 2 (19:27):
Everything on?
Speaker 3 (19:29):
And not all?
Speaker 7 (19:32):
It's been ten thousand hours, ten thousand more. If that's
what it takes to learn, that's be hard on yours
and I might never get there.
Speaker 2 (19:46):
I'm going side.
Speaker 7 (19:48):
It's two thousand hours of rest.
Speaker 3 (19:53):
And welcome back to the Weekend Collective. I'mpton Beverage. It's
twenty nine past four News Talks. It'd be we're talking
with Kevin Davidson. He's economist from Core Logic, just about
the cash right and the ASB predicting that the Reserve
Bank will actually cut it sooner rather than later. A
few texts here just before we because we've got some
other things we're gonna have chat about as well. But
you can give us a call on eight hundred eighty
(20:14):
ten Eightykevin. Just a mechanics question for you guys as
a private company that somebody's just asking, where do you
get housing sale data and all that sort of stuff?
How does it all work in terms of data? I
guess it's available to anyone who wants it, doesn't it.
Speaker 4 (20:31):
Well, well more or less? Yeah. I mean there's there's
two main sources that comes in from councils basically, and
also we have a what's called a recent sales capture
program where you're pretty much just tapping any source you can,
ringing estate agents byre submitting their own deals. So it's
either those official channels through council records coming back in
(20:52):
or else those agents. So I mean basically anyway you
can as the simple answer. So in your property information
it is it is public information. Your name goes on
a title, you can look up who own what property,
you know, what they paid, all of these things. So
it sometimes feels a little bit of fit, a little
bit grayer read like you're almost snooping on people. But
(21:14):
proper information is in the public public domain, so yeah,
it's up for everyone to see.
Speaker 3 (21:20):
And mind you, the analysis is not that straightforward. Of course,
there's a lot of data out there, which is where
you guys come in.
Speaker 4 (21:26):
That's right, yeah, And I mean one thing I find
myself saying this a lot to people lately is that
as an economist, as an analyst people presenting into other people,
you you sort of have to use averages. There's no
other way around it. We can't talk about every single sale.
It just doesn't make any sense. But at the same
time you have to have a degree of sort of
(21:48):
humility that nobody buys the average and people buy an
individual property on an individual street with their own financing arrangements,
their own sort.
Speaker 3 (21:57):
Oh, I think we've just watched.
Speaker 4 (21:59):
Two high level and too low level, and there's somewhere
in between. As a happy menion.
Speaker 3 (22:04):
Okay, just a couple of texts here, Tim, It's absolutely
grim out there. It's worst I've seen in fifteen years
in the building industry. And getting two calls a day
from billers and other trades looking for work in Auckland.
I've never had this before. It's very real, and even
dropping registrates to five percent way and much effect because
a lot of the issues are structural, says Steve Is
that Calvin an example of certain industries are like the
(22:27):
Canary and the mine.
Speaker 6 (22:30):
Yeah.
Speaker 4 (22:30):
Well, I mean, construction has been in a downturn for
probably about two years now, and there it came off
at a very high level. So in a long run context,
construction is actually sort of about back where you might
call it normal. But that doesn't make it any easier
for people out there on the ground. And certainly there
are a lot of struggles in that construction industry for sure,
but it's not the only industry. We're starting to see
(22:51):
things like manufacturing looking pretty weak. Retail spending has been
weak for a while. So yeah, there's no hiding the pain.
I mean it sounds crass or crude or whatever, but
this is monetary policy and action. This is what my
untary policy is supposed to do. The Reserve Band has
talked about engineering and recession. This is sort of what
they felt they needed to squeeze inflation out, you get
(23:14):
some job losses, you squeeze some industries, and that's what
we're what we're seeing. I suppose now. I do think
there is a pretty strongly grown risks they hang on
too long and actually those rate cards might need to
come through sooner. So that's what we're all kind of
waiting for, I guess, but certainly no fun hearing those
stories that. On the other hand, it is monetary policy
(23:34):
playing out.
Speaker 3 (23:35):
What are the opportunity So when's the next when are
the next two or three cash right announcements? What's the
what's the schedule for that.
Speaker 4 (23:43):
We've got one very soon and in fact coming up
this week on Wednesday, they're going to make an announcement.
Now that's sort of an interim mine. They call it
a monetary policy review, which is a short one. It
doesn't have any associated forecasts or detailed analysis. I suspect
this will be pretty short. It'll just be towing the
same line that we're not changing the official care shrame.
We're still concerned about inflation else to see here.
Speaker 3 (24:06):
This is where the words all matter, won't it. It won't
be people be dissecting every little bit of Shakespearean reference
or whatever.
Speaker 4 (24:13):
That's right. Yeah, words are going to be very important
in this one. I suspect this one might come and
go fairly quickly, but the next one, which is in
mid August, will be a full monetary policy statement. That's
where I suspect they might just start to lay the
groundwork for that November eight cut. You might start to
see where it's like, you know, I'm not exactly sure
what they might be, but inflation close to target and
(24:36):
we may not need to keep monetary policy as restrictive
for as long. Yeah, those sorts of phrases which might
sound pretty vague to people, but it's a signaling thing,
and it's a bit of gamesmanship with financial markets. I
think their language might stay pretty much the same in
this next decision in a few days time, get to
middle of August, that's where it might start to soften
(24:56):
just a little bit. So that's my expectation.
Speaker 3 (24:58):
I've actually forgotten what the ASB said. Did they say
they were just talking about the end of the year
or they think it's going to happen sooner than that.
I think it's I think it's November, isn't it.
Speaker 4 (25:07):
Yeah, November there's the last monetary policy stayment, the last
opportunity to make a call on the official cash readers
November and then they take It's a three month break
I think over Christmas through to the next decision February.
So it's probably another factor to just keep in mind
that they won't have another opportunity after November until February.
Now do they want to leave it on hold for
that long over that period where people could continue to struggle?
(25:30):
So so I think went for November, and it's sort
of where I'm going.
Speaker 3 (25:35):
No chance of August is there?
Speaker 6 (25:37):
Is there? No?
Speaker 4 (25:40):
I mean that would be a surprise now. I mean
Adrian Oren and Reserve being under his leadership, have surprised
us before, to be fair.
Speaker 3 (25:49):
So poor Park. That's that's his motives, that's his operating playbook,
isn't it? You know, be predictable? Hey bango, there we
go twenty five off.
Speaker 4 (25:57):
Yeah, I heard during the week. I think somebody like
Ravo Bank might be still clinging to that sort of
view that there could be a rate cut in August. Now,
it would be a big surprise, to be honest, it
would be a very big surprise. But maybe that's you know,
that's that would would shot people when I would give
people that little bit of a little bit of sugar
rush that they might need. Perhaps, So who knows. I
(26:18):
think it's a it's a low probability.
Speaker 3 (26:19):
But I'm going to remember this conversation Calvin when in August.
I'll be like, I must get a hold of your
number and tweet you're saying, told you so, not that
I did tell you anything. Actually I never.
Speaker 4 (26:31):
I'd never I'd never commit to anything. I never commit
to anything on zero percent or one hundred percent. You know,
you always give yourself a.
Speaker 3 (26:36):
Little oh exactly. Yeah, not many economists would would would
would breach that rule. Anyway, Hey, look we're going to
take a break. We also want to have a quick
chat after the break about the government's planning announcement. There's
a big shake up for property. It's continuing in essence
many of the things that Labor were talking about, but
basically they were removed that people are the one worry
maybe people have was well, maybe more than one worry.
(26:59):
But will it lead to tiny houses and balconies and
all that sort of stuff. Or is it just we
need to get property is built and we need to
open up the rules and lected to skip cracking. It
is twenty four minutes to five News Talk SEDB. According
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right with Kelvin Davidson CA core logic. The other thing
I want to get your take on, Calvin. I guess
it'd be fair enough to ask you from an economists perspective,
(28:28):
although as a key we as well with you'd have
your own opinions about it. But the announcement from Chris
Bishop revealing the housing planning changes for new homes the
thing that stood out to me. They're getting rid of
the minimum floy area in balcony requirements for apartments, which
did make me clench a bit. But is there an
economists point of view that can just make us feel
(28:49):
a little bit more relaxed. Yeah, what's your take on
the announcement? Were you surprised by it as well?
Speaker 4 (28:56):
I mean not so much surprise, and that they've signaled
for a long time that they want to flood the
market with land, as they've called it. And this was
prele and you're probably going back sort of tide eighteen
months even even prior to that, So it's been well
signal that they want to really look at the housing
market and really try and get housing supply up. Now
you sort of have to take it with a little
(29:17):
bit of caution because we know, over several different governments
of both different colors, that we haven't had the housing
supply we need, perhaps and we've got a housing affordability problem.
So I suppose that history is in the back of
your mind. But I mean, I look at these changes
and I think, honestly, if we're ever going to change
things around, it seems like now could be the time,
(29:38):
and that some of these changes are pretty wide ranging.
It's not just the apartment thing. They've talked about opening up,
insuring councils are planning for thirty years of land supply
and softening boundaries around rural and urban so intensifying around
transport hubs and using brownfield land, but also greenfield land.
Speaker 3 (29:58):
They hold it brownfield greenfield, which is which what are they?
Speaker 4 (30:03):
Brownfield's your land that you've already used in some shape.
Greenfield's you knew sort of on city fringes, So both
types of development. That The problem with greenfield, of course
is that you need some infrastructure to get there, and
that's that can be a bit of a problem sometimes,
But there's also that making it easy to get imported
building materials in Greenny flats and something that's been talked
(30:25):
about in the past couple of weeks too. So it's
a wide ranging set of changes, and like I say,
you've got to be you've got to be pretty optimistic
that if we're ever going to make a change, well
now is as good a time as any. So you
don't have to keep that history in mind. But but
I feel pretty optimistic. Infrastructure is a big part of it.
You need to It's okay, very well opening up farmland
(30:47):
for new housing, but it's ensuring that the roads are there,
the powers there, the waters there that I think that's
still a bit of a hurdle. So hopefully we can
get over there.
Speaker 3 (30:56):
I mean, I'm yeah, because there are some obligations on
developers that they have to provide. You just can't bang
up a set of flats or something without providing certain
other like they want super much. You know, if it's
a big enough development, I think you need to provide
retail space and all that sort of stuff, which actually
is that's a reasonable hoop for developer stuff to jump through,
isn't it.
Speaker 4 (31:16):
That's right. Yeah, I think it's all wrapped up in
what I understand to be development contributions that developer will
make to those services that are essential and opening up
the land. You're talking about broadband and roading and pipes
and all of these sorts of things. So it's not
an overnight fix. Of course, that these things will take time,
and of course the big problem, I guess with analysis
(31:37):
of these things, you never know the counterfacture. You don't
know what would have happened twenty years down the track
if we didn't have these changes. It's always hard to number.
So but I'm optimistic. I'm hopeful that we can fix
the problem because affordability is a big challenge. And it's
not just affordability, it's the quality of housing, it's our
state housing wait list, all of these things. I think
(31:58):
there's a massive acceptance that something needs to change. So yeah,
I guess let's get them binded and hope it works out.
Speaker 3 (32:05):
Do you worry about the minimum sort of size requirements
being gone. I mean, we can all imagine the worst
sort of development that we don't want to see, But
then again, I can also imagine the reasons that you
would want to provide that option for people who are
you know, especially for student accommodation things like that, and
people want to buy a bunch of small apartments to
rent them out to students or whoever. But do you
(32:25):
worry about those minimum size requirements being gone or do
you think the market looks after that. By the way,
you can give us a call on that if you're
like one hundred and eighty ten eighty. But what do
you think, Galvin?
Speaker 4 (32:33):
Yeah, I don't necessarily have a big problem with reducing
sizes or or reducing taking away that minimum. I think
the market will probably decide. I think the thing that
everyone wants to see, regardless of size is quality. You know,
you want something that's of a decent build standard and
as nice and warm and function. I think that's probably
the big effect, rather than necessarily of the size. And you
(32:55):
go around lots of different countries in the world and
there's people living in fairly small spaces. Now, obviously everyone
would like the big mansion, but that's not a reality.
So I think as long as you provide spectrum of
housing in the right places, of the right standard, I
think that's probably the better goal.
Speaker 3 (33:13):
I hadn't worked at ma answer to this, because I
can imagine living in a tiny space of us on
living in the heart of Paris, but Hey, I'm in
the heart of Paris. If I'm at the top of
Queen Street, I'm not sure. I'm sure. I'm quite feeling
is enamored with my accommodation. And that sounds a bit well,
it is what it is, isn't it.
Speaker 4 (33:32):
You change your expectations shift, I guess. I mean I
lived in London in a sort of thirty square meter
and at the moment I think my garage is probably
bigger than that right now. So you know, your perspectives change.
Thirty square meters it was great for that time in
my life. So I think it's providing, you know, a
spectrum of housing, a different range of prices for housing,
(33:54):
and as long as it's of high standard, I think
that's that's probably the thing that matters most.
Speaker 3 (34:00):
Actually, I did say a cartoon by Actually I mentioned
this in just a moment. Actually, we're going to call
go to and so hang on stand by for a second.
Catherine high Hi.
Speaker 5 (34:11):
It's a question for Calvin whether he's coming across increasing
numbers of limbs that have indicating that those properties are
likely to be you know what we call managed retreated
or coastal areas. I'm just hearing you know, the situation
(34:31):
up in Capity which is causing a lot of clients
alarm that coastal regions are going to be forced to
leave the land and moved into the city, the.
Speaker 3 (34:40):
Managed retreat sort of scenario.
Speaker 5 (34:42):
Yeah, so christ Church City Council has climate adaption plans
and I think they've got you know, several billion dollars
to move people or you know, in the in the
name of climate alarm.
Speaker 3 (34:55):
What do you reckon? Calvin?
Speaker 4 (34:57):
Yeah, I mean I must have been. I don't look
at that level of granularity too much and from day
to day in my job, but certainly there's a lot
of bigger picture conversations around climate change, around flooding, all
of these things. I think it's sort of the next
really big theme in the property market in terms of pricing.
You know, our people prepared or are they willing From
(35:20):
a seller's perspective, are you willing to sell for a
bit less if you've if you've got a property that's
marked down, is at risk? Our buyers willing to pay
the prices sellers want. I think there's a really big
issue there, and insurance is obviously a keep part of
it too. Insurance insurance available what's the compt So don't
look at individual limbs. But there's a big, big issue
(35:40):
out there in terms of that that.
Speaker 3 (35:42):
Whole climate change. Okay, right, let's go to Steve.
Speaker 6 (35:46):
Get Yeah, good eight. Look on in the architectural industry,
building industry, and I think it's not a great thing
taking off these moments or areas. I think it's very,
very nig to think the market is going to keep
these floor areas up because people aren't going to buy
(36:09):
anything it's twenty five square meters. It's simply not the case.
Because New Zealand we traditionally go into a supply problem
and then people just want a roof over their heads.
Developers will go for the low hanging fruit and they'll
look at in a city and this is what this
(36:29):
is sort of designed for in a city department living,
isn't it. And they'll pack in as many as I
can because I've worked around that, and you're given that
mandate by developers to pack as many as you can.
And look, this whole thing is just being comfortable just
because it's new and you got a nice kitchen. If
you're only one point five meters across, those walls are
(36:51):
going to come closing and very quickly, and if you
don't have the amenity around you. And when you talk
about the small places around the world, that's all well
and good. In Hong Kong and Singapore, when you can
step take the elevator down into basically an extension of
your living room, aren't you You've got everything right there
at your fingertips. So that's not the case here and
it probably won't be for probably another three hundred years. Right,
(37:12):
So we live differently. People live more in isolation, so
they probably need the walls to be a little bit
wider apart on housing New Zealand thing, right, do you
know how they could fix that too? There's not enough
creative thinking. Why don't they have a two tier system,
because it's quite obvious that everybody, a large proportion of
these housing the New Zealand tennants have mental health issues
(37:33):
and the Kasai asylums, let's face it, why don't they
have these sell up all the inner city Auckland inner
city places, move out the rural areas right, grab big
chunks of land, cheaper, build them all together, have twenty
four hour security to monitor these people, and then have
another tier where you've got the ones that aren't antisocial, right,
who are working, paying the bills and they get to
(37:54):
live further closer in the single dwellings and then they
step up into the private sector. We need to break
it up. You can't just have this.
Speaker 3 (38:05):
I think that's a problem. Yeah, and now thanks for
of course, Steve. I appreciate that. Hey, look, we do
have to go to a break. It's ten to five
news Talk ZB and welcome back to the One Roof
radio show. I'm Tim Beverage. It is just coming up
to six minutes to five.
Speaker 1 (38:26):
The one roof Property of the Week on the Weekend Collective.
Speaker 3 (38:30):
And the one roof Property of the Week. Oh my word,
I say that all the time, don't because I guess
that's why we have a Property of the week, because
they're all spectacular. Calvin, by the way, I think we
might have emailed it through to you if you want
to check it out. But it is a four bedroom,
three bathroom, three car garage on it's seventy six Cliff Road,
(38:50):
Tor Bay. It's okay, it's not first time byars territory
unless you've just won the lottery. It's valued at ten
and a half million dollars. It's an iconic cliff top
residence captures an astonishing two hundred and seventy degree ocean
panorama reaching across the Funga prior to rang Atoto Island.
Five hundred and fifty square meters are home. So not
(39:12):
going to court, not exactly on the minimal side of things,
in a homage to unique Japanese style and traditions, on
a three and fifties meat square meter section. It's got
a twenty five meter lapool. The bathrooms are generous. The
thing that stands up to it for me and I
would seriously go and have a look. It's a beautiful property.
(39:33):
Seventy six Cliff Road. I think I'd spend half the
day in the bathroom. It's just got one of those bathrooms.
Is no curtains or anything, no shades, It's just glass
looking out to this magnificent view. I don't know if
you've managed to bring that up on your screen there, Calvin,
I'm not sure if you're looking at.
Speaker 4 (39:49):
The proper I've checked it out. I mean it's a
sort of property. I don't really like to look at
it most of the time because it just makes you jealous,
doesn't it prefer not to I've been watching the firms
Spencer's Best New Zealand Homes or something, and it's a
sort of property that we belong on. That just yeah,
a starter, But I mean, in my situation, my kids
are still wake in the middle of the night. You've
(40:10):
still going to love your real life, don't you.
Speaker 3 (40:12):
So you could set them further away so you don't
hear them, that's right, Hey, Calvin, amazing, Yeah, Calvin, Hey,
thanks so much for the time of the show. Now
core Logic. Now, look, you provide a range of services
to a whole a bunch of professions as well, but
people can access some of the data and the reports
and the newsletters that you provide. How can how can
(40:33):
they check out the work you do it core Logic.
Speaker 4 (40:35):
Yeah, call Logic dot co dot ins to probably be
the best start in terms of the research output, and
that gives people. The idea is to really give people
a flavor of the information we have and like you say,
across a wide range of industries to the banking's part
of it, but insurance, real estate, government, construction, the whole gamut.
Really we get to a lot of geographical information systems, mapping, addressing.
(40:57):
So yeah, call logic dot Co donions to be the.
Speaker 3 (41:00):
Starting point subtitle. It's the whole shebang on property that's
just my own. By the way, hey Kelvin, thanks so
much for your time this afternoon, and really appreciate it.
Speaker 4 (41:09):
No worries.
Speaker 3 (41:10):
Okay, cheerio and we'll be back shortly. The Parents Squad's next.
John Cowen has he's here already. He's brought me a
cup of tea. We're raring to go on The Parents Squad,
which is coming up shortly. It's three and a half
and don't forget we're also going to be rapping sport
or previewing the All Blacks match shortly before we finished
the show, it's three and a half minutes to five.
Speaker 1 (41:34):
For more from the Weekend Collective, listen live to news
Talks it'd be weekends from three pm, or follow the
podcast on iHeartRadio.
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