July 12, 2025 • 41 mins
New reports show the to cost to build is up.
The OCR was also left unchanged this week - and it's expected to stay at 3.25%
Should buyers look into property now before the costs and OCR go up again, or should they wait it out?
How can we make that call - is it on gut instinct, or the numbers?
Infometrics Principal Economist and CEO Brad Olsen joins Tim Beveridge for the OneRoof Radio Show...
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Episode Transcript
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talk SIB.
Speaker 2 (00:29):
Yeah, so welcome back to the WONDERFF radio show that
believe it or not, it is a little bit of
James Brown, but without the James Brown because I think
this might be the instrumental part of it.
Speaker 3 (00:36):
But anyway, welcome back to the show.
Speaker 2 (00:38):
This is the Weekend Collective for the twelfth of July. Now,
by the way, if you missed a panel we had
with Bridget Morton and Luke Tala, you can go and
check out wherever you podcast look for the Weekend Collective
on either News Talk said B Dot, COURDA and Z.
Speaker 3 (00:51):
We can go to iHeartRadio.
Speaker 2 (00:52):
Pretty easy to track down and we get each hour
loaded up pretty quickly after the format after it's concluded.
But right now, this is the One roof Radio show.
And he look, he's a familiar guest to us on
our panel, and he's also a familiar voice to many
people who will basically follow the news and especially on
economic issues and all the sorts of things like that.
(01:13):
But I think it might be his first time as
a guest on the One Roof radio show. And if
I say he is Infometric's principal economist and CEO. You
can probably guess that the next two words are going
to be Brad and awesome.
Speaker 4 (01:26):
Brad, gooday, good afternoon.
Speaker 3 (01:28):
How are you.
Speaker 2 (01:29):
You've come into the office. I see you're in Wellington,
but you're actually not sitting at home on you know,
in your living room. You look like you're in your
You're not as big an office as I thought it
would be.
Speaker 5 (01:39):
I'm not slumming it, but I'm an economist him. I mean,
we're still trying to keep costs down in there. You know,
I'm not trying to act like a lawyer and sort
of have overheads bigger than my entire ego. So yeah, no,
and in the office, have a look at the numbers
and looking forward to the next hour of conversation about
what seems to be the most important topic that most
New Zealanders get hot under the collar about the cash rate,
(02:01):
the cash rate, property, everything in between.
Speaker 2 (02:03):
Now, this is the question. We want your calls on
this as well. So the the ocr was left unchanged
this week, and we want to know how much do
you think now as a listener, the question also relates
to you may remember that there was a massive boom
in the property market following COVID and very very very
cheap money, so we saw a deliberate we saw an
(02:24):
absolute effect of cheap money versus property prices. But how
much do you think and we want your calls on
this on eight hundred and eighty eight hundred eighty ten
eighty text nine two nine two. How much do you
think the market is being influenced by the cash rate?
Speaker 3 (02:41):
Right now?
Speaker 2 (02:41):
It's three point two five percent, so I guess people
are borrowing at sort of like high five sort of
around six percent, depending on how long you're in fact,
I haven't checked the latest and straight so you can
update on.
Speaker 3 (02:50):
This us on this, Brad.
Speaker 2 (02:51):
But look we'll firstly so we want your calls and
you can chip in anytime. Eight hundred eighty ten eighty
But Brad, three point twenty five percent unchanged?
Speaker 3 (03:00):
Was this surprise?
Speaker 4 (03:04):
It wasn't a surprise, that's for sure.
Speaker 5 (03:05):
I mean, the market was pretty firm and picking an
expectation for no change, and that was really just because
the last time the Reserve Bank came out back in May,
they decided to cut at that point, but there was
one member who was nervous didn't want to cut it
wanted to sort of hit pause and given some of
the data we'd seen coming out, but more pricing pressure
starting to show through in the economy, economic numbers that
(03:28):
actually were better than the Reserve Bank thought. I'm not
going to say they were great, but they were better
than the Reserve Bank thought. It just seemed to be
a time when the Reserve Bank was going to be
a bit nervous, bit unsure about how quickly it wanted
to continue to bring things back. Also came just a
day or two after the US President made some decisions
around tariffs, which again sent us all into a bit
of a tailspin. Really for the Reserve Bank, they seem
(03:51):
to want to communicate, look, yes, further interest rate cuts
to come. They pretty strongly signaled that in fact earlier
this week, but they also said it not right now.
They just wanted to hit pause and sort of assess
what's coming through because of that uncertainty, because we find
ourselves in this what is quite an awkward position, I think,
where the economy doesn't seem to be doing well.
Speaker 4 (04:11):
You know, talk to.
Speaker 5 (04:12):
Anyone out there at the moment, and no one is
sort of seeing a lot of activity, but pricing pressures
are a bit more intense than you'd usually see in
this part of the economic cycle, and it's the Reserve
Bank's going look both of those uneasy, unfortunate, a bit uncertain,
wanting to just take a breath until August to see
how things land. So they're pretty signal that there's more
to come, but just not right here right now.
Speaker 2 (04:34):
Okay, they've signal that there is more to come? Are
we what does that? I mean, what does that mean?
How much can we read into that? Because they do
choose all their pronouncements and words very carefully, I would
imagine there wouldn't be too many people who are going
to fix long right now with them orgage rates, because
they're going to base it on the fact. Look, I
might just fix for three or six months whatever the
(04:56):
minimum is and wait for the next Reserve Bank announcement.
Speaker 3 (04:59):
But how much can we rely on it?
Speaker 5 (05:01):
Well, I mean, if you go back to this time
last year, I think was when the Reserve Bank was saying,
you know, geez might hike it a little bit further,
and then all of a sudden, you know, come July
last year, they went from going hiking it to cutting
it or thinking about cutting it, and so you sort
of had this pretty big switch around that that had
come through. To be fair, though, I think the Reserve
(05:22):
Bank's pretty clear at the moment. Their forecasts are pretty
consistent that, yes, they think there's probably the ability to
ease a little bit more. That's also what just about
everyone else in the market is pecking. I had a
bit of a look at what the banks are packing
this morning. Most of us, including it for Metrics, we're
packing sort of another interest rate cut down to three percent.
A few others are packing further cuts down to two
(05:44):
point seventy five or two point five percent. So yeah,
there probably is more in there. But and this is
the big thing. If you're sitting out there in the
property market, you've seen two hundred and twenty five bases
points of cuts already, are you really going to wait
for the potential for another sort of twenty five or
fifty like you've done a lot of the heavy lifting.
I say that, Tim because it's really interesting looking at
some of the spending and lending numbers that are coming
(06:06):
through that New Zealanders really are diverging a bit more.
You sort of asked, you know, what would you do?
Although we won't try and do financial advice on the show.
What we can do is highlight some of the trends
that of what New Zealanders are actually refixing on. Up
until April, quite a big focus on the likes of
a two year, one and two year rates. We saw
around about fifty two, sorry, fifty nine percent of new
(06:29):
mortgage lending in the month of April went on one
and two year rates, And I think there was people
who were going, look, just a bit nervous about the
economy where it's sitting, all this tariff talk, wanting a
bit more security. Can lock in my repayments for twenty
four months, I can budget around that, but still a
good proportion around a third ish of mortgages that are
being written in recent times going on floating rates as well. Now,
(06:49):
I think that's the thing you're seeing some people going, look,
I'm happy to wait it out another month or two,
but also a group of people who are saying, look,
it's already pretty good. I'd like to come off my
very high rate at the moment, I'll take something, even
if it's not the absolute rock bottom. It's a lot
better than the sort of six or seven that I
was starting with before so how much.
Speaker 2 (07:08):
Does uncertainty as you've said, Okay, if I go backtrack
a little bit you talked about and we remember how
the Adrian or was saying, look, we might have been hike,
and all of a sudden he was cutting. But that's
an easier decision for the public to digest, so he
could make that sort of u turn, whereas to say
we're going to cut and suddenly hike would be it
would be would be a less very unpalatable.
Speaker 3 (07:31):
Move, wouldn't it?
Speaker 4 (07:33):
Oh totally.
Speaker 2 (07:34):
So what I mean is if they are projecting, I'm
guessing that if they're projecting a drop, then they really
mean it. Whereas he can project raising it and if
he doesn't, everyone's like, oh, well good, you didn't raise it,
you lower it.
Speaker 3 (07:47):
Great news.
Speaker 5 (07:48):
But basically, and I think also at the moment, like
just the fact that they are holding the interest rates
where they are by having no change is I'm not
going to say it's equivalent to a raise, but like
those are the two options at the moment. It's either
drop it further or take a pause. And the taking
a pause but is sort of equivalent to that bit
of all g's those inflationary pressures just look a bit
more intense, and so don't want to get away on ourselves.
(08:11):
Don't want to sort of massively cut interest rates further
to then have to hike them out the other side.
So instead the Reserve Bank seems to be going, look,
we'll take a pause at the moment so we don't
overdo it, but also so that we don't have to
hike later on and sort of bamboos of everyone, because
you're right, that would sort of completely send everyone into
a flat spin. And sort of rightly, so the Reserve
Bank doesn't want to be going back on themselves just
(08:33):
a couple of months later, and so instead they're saying, look,
we're just going to go hands off for a moment.
Speaker 4 (08:37):
We're just going to watch how things evolve.
Speaker 5 (08:39):
But yes, probably if the economy evolves as they expect,
and to be fair, I don't see any reason that
it wouldn't, then yes, they can probably cut interest rates.
But further the questions probably not, is there a further cut.
It's a question of when and how many?
Speaker 2 (08:53):
Well, because if you're talking about I mean some people,
I mean you mentioned, I'm not sure it's your prediction,
but you know, maybe even down to two point five
two point seventy five. That's starting to get really cheap.
I've got to say that as a as a if
I was a first time buyer when we're going to
dig into this, of course, because what effect it has
on the market. Because when we had really really cheap
money back in COVID time, we saw the market go
(09:15):
through the roof.
Speaker 3 (09:17):
So what's your take on it.
Speaker 2 (09:19):
You know, is there a point at which the cash
rate drops to a point you think, oh, that's going
to trigger a bit too much action in the real
estate market.
Speaker 5 (09:28):
Well, I guess that's that's the that's the balance that
the Reserve Bank's trying to bring through because trust me,
if your housing market starts to pick up, so too
does your general economy. But also to such a degree
that again you might sort of stimulate a bit more inflation.
So I feel like we were at at the moment,
it's probably not a bad spot. I mean, I think,
you know, on on for most of the big banks,
you're able to get sort of like a one year
(09:49):
fixed rate around sort of I think four point nine
percent four point eight five, So like there's still a
pretty good rate. I think of your comparison is when
you could get like two point five percent on a
one year mortgage back in twenty twenty. That's a bad
comparison point. We all we'll never get back there. The
OCO will never be that low again. But if you're
(10:09):
sort of looking at things and going, well, I've got
to make sure as well that I can repay a
mortgage on a higher rate because your bank's still going
to test you. It's probably sort of six or seven.
So where we are at the moment probably not the
worst goldilock zone you could find. Yes, a little bit
of sort of change on either side, But I think
it's probably when we get below three percent, when we
start to get into those twos, that you do start
(10:29):
to warm things up in my mind just a bit
too much. And I guess I worry about that because
you look at what's happened to a lot of people
now where they got into the housing market when they
were very very cheap rates. Now the sort of stuck
on much higher rates. Sometimes their properties aren't worth as much.
Like there's some people out there who are doing it
real tough in the housing market because we told them
to go so hard.
Speaker 2 (10:51):
Yeah, I mean, gosh, there must be some people who
are really settled with some pretty horrendous circumstances. Do we
actually do you track the mortgage sales? Sort of figures
because the approach of the banks to mortgage sales is
different than it used to be. Back in the days
where the back of whatever the property sort of paper
was would be pages and pages of black and white photos.
Speaker 3 (11:11):
We don't quite.
Speaker 2 (11:12):
See that these days, despite the fact there'd be a
lot of people who are challenged.
Speaker 5 (11:15):
Do we no looking I haven't looked at the latest
start in the last month or so, but most of
the numbers we've seen coming through, Yes, there's been a
bit of a lift, but sort of like nowhere near
where you're talking around the likes of the GFC and similar.
And that's because you're exactly right. The banks have sort
of changed their ways from two points of view. One,
everyone's way happier to go and sort of work with
(11:36):
their customers. If you're a bank, you don't want to
sort of foreclosed or anything like that, so you're trying
to work with people around their repayments or figure out
sort of what options are the year. It's also why
you've got a lot of properties on the market at
the moment I think it is something like half a
year's worth of sales out there, and that's because people
don't want to do a mortga g sale, so they're
trying to move their house along themselves before.
Speaker 4 (11:57):
Things get even worse.
Speaker 5 (11:58):
But probably most importantly is that you know, to a degree,
we've sort of saved some people from themselves as well.
We had those test rates the last couple of years
that meant that, look, if you were going to go
and buy a house, you got tested at a higher
rate than what you'd actually repay the mortgage at a
lot of people at the time said that's not fair.
I can afford the mortgage rate right here, right now.
Don't test me at that eight percent or so, don't
(12:19):
test me at seven. I want to get the mortgage.
But we've probably ensured that there is less vulnerability, that
there are more people who can actually legitimately repay their
mortgages sort of each and every week. And so again,
you're right, the dynamics have changed.
Speaker 2 (12:31):
How much do you think that that testing for vulnerability
and maybe making sure there are fewer people who are
in a vulnerable position because they've over committed. How much
has that change affected just the interest in the market.
Speaker 4 (12:45):
Oh, I mean, I think there's been a bit of it.
Speaker 5 (12:47):
I think it more likely it's sort of kneecapped a
few of those that were probably generally younger buyers and
didn't have quite the same level of a deposit. It'd
be those guys that have probably I think, get locked
out a lot more. But again, I mean, you look
at some of the trends this year, and geez, things
move around so much. When the likes of the tariffs
came through in April, some people lost probably a couple
(13:10):
thousand dollars worth of their deposit that they were thinking
to use for a property. So again, sort of all
of that vulnerability you've just seen the system try and
limit to just how much is coming through. Same with
some of the loan to value ratio restrictions and similar
they've actually in recent times acted as a fairly reasonable
handbreak on the housing market getting too too much further
(13:32):
out of hand. You are starting to see momentum tack up.
I think that's hour thing. Like you look at property,
it's not like it's completely and utterly in the doll drums. Yes,
it's down on that peak, but it's starting to pick
up a little bit of momentum, slowly but surely, And
I actually think that's good for New Zealand's property market.
If it's going in leaps and bounds all the time,
if property prices are just surging, you get a whole
lot of people who can't enter the market. And similar
(13:54):
if it's going a little bit more steady as she goes,
then you just sort of breed that level of confidence
that yes, it might not be the biggest money spinner immediately,
but actually I think I've still got the potential to
get in.
Speaker 2 (14:05):
To dig in, we're going to dig into that a
little bit about facts versus emotion as well, because when
you talk about momentum in the market and things picking
up or not, how do economists, people in your position
do you ever take into account?
Speaker 3 (14:20):
I mean there's always.
Speaker 2 (14:21):
Facts, figures and numbers, and then there's hysteria fomo or
what's the other one for over.
Speaker 3 (14:28):
Foop or fomo?
Speaker 2 (14:30):
How much do you how much do you think that
emotions play a part in what a market is doing?
For instance, if I flesh that out of it at
the moment. You know, recently we had the headline from
I think was caautality. You said that in twenty thirty
something the market was in real term is going to
be worth twenty percent less than it is now. I
might have got that slightly wrong or not, but the
(14:51):
headlines haven't been great, so people store that away and
then they have an emotional reaction to it and that
affects the market.
Speaker 3 (14:58):
What do you reckon?
Speaker 5 (14:59):
Oh yeah, look, I mean certainly in the New Zealand
housing market, people's sort of perceptions and expectations, the vibes.
Speaker 4 (15:05):
The vibes matter.
Speaker 5 (15:05):
I mean, economists talk about animal spirits, but look, every
day punt is that they're going to be sitting there.
And you react to some of the big and I
think it's sort of almost more formal news that you get.
I remember, for example, when Auckland's latest valuations came out
nine percent down.
Speaker 4 (15:20):
Now, like in my mind, I thought that.
Speaker 5 (15:23):
Everyone knew that house provices were down, like unless you've
been living under a rock. We've been talking about that
for the last couple of years, that housing prices in
you know, in Auckland had fallen back. But there seemed
to be this a little bit of hysteria around the
nine percent drop because it was formal, all of a sudden,
you know, Auckland Council were saying it and the property
providers were sort of taking that into account.
Speaker 4 (15:44):
But I think it's because people need.
Speaker 5 (15:45):
A bit of a benchmark and and sort of it's
hard to get an idea of how much is this
property worth because the only time you know how much
a property is worth is when someone buys it, or
when you're told by some site, including the valuation ones,
that it's worth probably thumbsuck this much money. So those
numbers do have a big important sort of role in
how people dictate there at terms. What I think is
(16:07):
challenging though, right is you've got, in my mind, sort
of two sets of buyers and sellers out there at
the moment. One set are people that they've got a seal,
they need to move stuff along. They're having to sort
of put their property price in line with what the
market will pay, which means that if you're a buyer,
you know that there's a lot of properties out there,
you don't have to sort of have that same level
of fomo because at the moment there's quite a lot
(16:29):
of properties. You can sort of take your pick and
you can negotiate everyone around. There's a second group though,
of sellers who they saw a number back in twenty twenty,
twenty twenty one the highest number they've ever seen for
their property, and they will not take a cent less
for it ever, even though the market is completely changed,
even though interest rates are still higher than sort of
at those low points. So it does, I think matter,
not even at the margins, but overall that Yes, the
(16:51):
vibes of the housing market does have an influence.
Speaker 2 (16:54):
Okay, well, look, we love your cause on this as well.
There are two questions really, one of those how much
does your attitude to the real estate market count on
your own gut instinct or is your gut instinct ultimately
just related to getting the facts in a way sort
of running with the hairs, hunting with the hounds on this,
because I've talked about gut instinct.
Speaker 3 (17:14):
But then, as Brad said, people.
Speaker 2 (17:16):
Reacted to the news of the devaluations of people's properties
with shock, but it was maybe it was just that
their gut instinct finally got them some facts to rely on.
So what you know what prevails when it comes to
your decisions on this, because in the end, we weigh
up our decision making based on a whole lot of
numbers and then we go, well I'm in or I'm out?
So how much does gut instinct player a role for you?
(17:39):
But also the OCI was left unchanged this week. Do
you think it's going to have any material effect on
the market and the activity or are you waiting for
it to drop before you get into it again? Oh
eight hundred eighty ten eighty text nine two nine too,
of course, Brad, And here I will continue to exchange
a few ideas, but you can jump in and crash
the conversation right now in eight hundred and eighty ten
(18:01):
eighty it's twenty four past four. Yeah, right, what then?
Speaker 3 (18:20):
Yes? Indeed? And we are German as well?
Speaker 2 (18:23):
Or should I say in my own way jammin it
doesn't sound quite the same anyway.
Speaker 3 (18:27):
I'm Tim Beverriges. Is Wonderfridie sham my guest, it's Brad awesome.
Speaker 2 (18:30):
We're talking about the three point twenty five cash rate unchanged?
What does it mean for the market? If anything? Is
it going to just keep things a little bit sluggish?
Or you know, are you seeing?
Speaker 3 (18:41):
Yeah?
Speaker 2 (18:41):
I mean how long are you what's what are your
what's going to going to take for you to get
into the market well, and how much of that is
also based on got instinct and taking your calls on
our eight hundred eighty ten eighty let's go to Winton.
Speaker 3 (18:53):
Get a.
Speaker 6 (18:55):
Yes, good afternoon. I wondered if Bread could tell it
sister banks are using we get through income ratios and
where are all these people that can apparently afford quite
easily one and a half million dollar houses two million
(19:16):
dollar houses? Could bad tell us if you're I mean
one and a half million just seems to be average
these days? What sort of income would you need to
print up to the bank on net one?
Speaker 2 (19:29):
Okay to income? And also who's got one and a
half million bucks?
Speaker 3 (19:33):
Brad yep?
Speaker 5 (19:34):
No, both both great questions. I mean, look, I certainly
to answer the second one. I don't have one point
five mill that's that's for sure, or the income to
get there. I think part of it is that you
see a lot of people talking about those one point
five million houses smilar Actually the number of people that
are actually buying in their area is somewhat lower, shall
we say. I mean you look at the likes of
(19:56):
the average house and this is the average in Auckland.
You're sort of talking more around one point two mill
at the moment, which is still a lot. But when
you take into a count you know at that sort
of range you're needing. I mean that there's a fair
bit of income that has to come forward. But you're
also talking household income. It's not personal. And so if
you've got a few people together, if you've got a
(20:17):
couple two people on decent jobs, if you've got maybe
the ability to bring in a border or similar and
we know that a lot of banks often ask about that,
then that's how you often get some of those bigger
property purchases over the line. But the other point I
think to make is that a lot of people are
still buying below that average price. I mean in Auckland,
you can still pick up houses in that sort of
(20:38):
seven eight, you know, nine.
Speaker 4 (20:41):
Hundred dollar range.
Speaker 5 (20:41):
Even lower than that's still around sort of five point
fifty if you're able to find the right thing. And
so it means that spread over all of that, yes,
you can definitely find those opportunities.
Speaker 4 (20:50):
The likes of the Reserve.
Speaker 5 (20:51):
Bank is lending out with those debt to income ratios.
The rules at the moment are that for own your
owner occupier, So if you live in the house yourself
that you're buying. Only twenty percent of lending to owner
occupiers can be where you've got a debt to income
ratio of more than six, so you can borrow above
six times that household income. For investors, it's twenty percent
(21:15):
for a DTI of over seven or neate. That's gross
from memory. But like I say that the big one
that often makes a big difference at the moment. I
know talking to a lot of people both who want
to buy, but also in the banking sector, is that
additional income's a big one. If you can sort of
convince or tell your bank that you've got a border
(21:35):
or a flatmate or a rent or someone coming in,
that's a whole Generally, third income, if you're thinking about
a couple, that starts to boost you forward. You've got
some of the if you've got a family, you've got
some of the tax credits from government. So I'm not
going to say it's easy to get into a house.
I don't think that's ever true. But the DTI certainly
aren't massively limiting people at the moment. Also because those
(21:56):
house prices are a bit lower than they were a
couple of years ago. If we were going back and
sort of talking about this in twenty twenty, twenty twenty
one would be having a whole different story because there
was a lot of very high value lending, but now
at the moment not a big constraint because of course
house values a bit lower income still going up and
people able to generally make it work if they've got
a few people in the offing together.
Speaker 3 (22:18):
Anything, anything.
Speaker 6 (22:21):
That's an incredibly complete answer, wonderful.
Speaker 2 (22:26):
Wonderful, We'll get them back sometime.
Speaker 3 (22:30):
Got on your wins. Things actually funny enough for Brad.
Speaker 2 (22:34):
I'm not sure if you've got a few people listening
to the show who are anticipating you, who are fans,
because I did have quite a few texts when I
announced that you were coming up, and one of them
just said the exceptional Brad Olsen coming up. Can't wait
to listen. Then another one I mean, yeah, so there
we go. I thought I passed Tim, you didn't.
Speaker 5 (22:54):
You didn't have me on the panel, so it could
have been me listening in and texting in myself.
Speaker 4 (22:58):
I'm kidding, I'm not. I'm not that vain jeepers hey.
Speaker 5 (23:00):
But nice to hear that people are interested out there
because I sometimes feel like in this role there's a
there's a lot of pretty tough stuff that we talk about.
I mean, economists are the dismal science. So it's nice
to hear that people are a little bit engaged, because
I could definitely sort of see a fear number of
people sitting out there going, God, it's the doom merchant
again talking about how the economies were stuffed.
Speaker 3 (23:18):
Brad. I actually, to be honest, you do.
Speaker 2 (23:20):
I'm not going to be overly complimentary, but you never
sound like a doom merchant, even when if you're giving
us pessimist at news. Of course, it's the thing is
things are backed up with a good with good facts
and context and things. I always think that, you know,
as opposed to this is the problem with the media
is that often people look at headlines and if you're
judging the property market by headlines, you're either feeling ecstatic,
(23:43):
panicked or depressed.
Speaker 3 (23:45):
And I like to say, you know, whereas it's when.
Speaker 2 (23:47):
We get the context for things that it helps so
so good on you anyway, I meant that without the laugh,
actually meant it genuinely.
Speaker 7 (23:56):
Kevin, Hello, Hi, we should be more focused on how
and why not these numbers in the housing market. I mean,
why all our economy is down because how the dynamism
the young people and the education are leaving and would
give preference to speculators over the educated and the industrious.
(24:19):
I mean, what sort of economy is that. It's something
that suits Australia. It doesn't suit in New Zealand.
Speaker 2 (24:26):
Are we giving preference to speculators these days?
Speaker 3 (24:28):
I don't know if we are.
Speaker 7 (24:30):
Do you text a pugeon or adoptor or nurse? And
how much do you text capital?
Speaker 8 (24:35):
I mean I don't want to. I just want parity
between education and effort and diamond enterprise over sitting back
and I mean having money.
Speaker 7 (24:47):
It's not a.
Speaker 8 (24:48):
Skull or the virtue. It's probably a bit of luck
or a bit of fortune.
Speaker 2 (24:54):
Okay, interesting, Kevin, what do you reckon?
Speaker 3 (24:55):
Brad?
Speaker 4 (24:57):
Oh? Look, I'm totally an agreement.
Speaker 5 (24:59):
I thought for a while that we should, you know,
text capital gains and similar. I think right at the moment,
I don't. I think the markets sort of being overly
providing to you know, anyone who wants to speculate around
housing and similar And look, if you have a look
into the numbers, the number of and sort of lending
to property investors isn't amazing. It's certainly coming up a bit,
(25:20):
and that's natural, and interest rates have come a bit lower,
but it's not sort of at the heaty highs that
it was a couple of years back when you were
really were seeing the pressure in the housing market. And
I think actually the biggest one that encourages me there
is the fact that you're seeing not only more houses
and similar on the market, which is allowing you know,
first home buyers and the likes in not saying it's easy,
but again the pathway is not as awful as it
(25:42):
once was. But it's actually the rental market that that
I find really fascinating, where you've actually now got in
some areas rents that are effectively falling. So you know,
for some people up and coming, they're able to get
a cheaper, more affordable rental to come in that hopefully
means they can save up a bit more money. They
might well again be able to get into that slightly
cheaper than a couple of years ago house. But look,
(26:04):
the long whom trenders is totally right that we can't
let ourselves get back into the position where people are
just going to make sort of money hand over fist
by putting the money into property rather than ewhere else. One,
it doesn't do good for the rest of the economy
because we're not able to fund as much advancement in
other areas. And two it does make it more difficult
to keep people here. I mean, we saw numbers this
(26:25):
week showing that we've got a massive net outflit of
kiwis to Australia and other parts of the world.
Speaker 4 (26:30):
So we've got to keep that in mind.
Speaker 5 (26:31):
But I think at the moment we're actually probably in
a bitter spot on the housing market than we've been
for a couple of years.
Speaker 4 (26:37):
You know.
Speaker 2 (26:38):
The thing I think this is again where where we
get a skewed version of the property market. I'm not
saying from you, Brad and from the headlines talking about
somebody flicked on a property, and people used to talk about, oh,
those people are just flicking on property and making money
out of.
Speaker 3 (26:51):
It as if it's easy.
Speaker 2 (26:53):
And because people who try flipping a property or doing
a quick trade, we don't really hear from them when
they make a loss, when they get bitten by cheap
interest rates. And I would say there would be a
lot of people, because if it's easy, then you'd all
do it. But it's not easy because the stakes are
massive and if you get it wrong and the market turns,
(27:14):
you're done, aren't you.
Speaker 4 (27:15):
Well, absolutely, and I think you're totally right.
Speaker 5 (27:17):
We do this all the time, right, there's always sort
of we report on certain parts of a story or
certain sides of the coin a lot more than otherwise.
So yes, we hear a lot about some of those
you know, speculators who'd flip houses, and especially because normally
they are the sort of people that are very loud
and proud about it, they don't talk about even the
losses that they'd have, and they would have losses, that's
(27:38):
just the name of the game. But I think that's
that's the difference, is that you've probably got a lot
of people out there who might give it a go
once or twice and just looking and.
Speaker 4 (27:44):
Go I can't make that work.
Speaker 5 (27:47):
And I guess the difference as well, and this is
a real, like sort of genuine concern, is that we
do also need to split up the pure speculators from
general investors, like some of those investors, you know, the
other people that provide rentals for a lot of people
across the country.
Speaker 4 (28:02):
That is an important service.
Speaker 5 (28:04):
Now I'm not saying that I think that anyone should
be making more money again year on year by just
moving property, be it a speculator and a vestor or
otherwise more than a person at least have made a
flesh and bone. But there are sort of different groups,
and I worry that sometimes we candense investors, speculators and
otherwise all in together and they are different.
Speaker 2 (28:24):
Just a quick question. This again, this is a related sentiment.
So a lot of the headlines talking about the markets,
you know, being slow, and it's come back a lot,
and it might still in real turns be worth a
bit less than the years to come. But then you
get people who haven't been involved in the market, they've
been renting property. Is it still expensive, isn't it?
Speaker 4 (28:45):
Oh yeah, oh.
Speaker 5 (28:46):
Yeah, this I mean, like the numbers are huge, Yeah, definitely.
I mean if you look at the likes of and
let's use it's still not the best measure ever. I
get that, But you look at some of the affordability
stats and look, we'll all stick with Auckland because it's
the biggest market. We talk about it all the time
at the moment, you're still need to say or basically
(29:07):
spend four points sorry, seven point four times your whole
entire household income to buy the average Auckland property. But
that's a lot of Basically, if you told an entire
household to stand still for nearly eight years, paid nothing,
food like absolutely nothing, and saved absolutely every penny, they
still would take nearly eight years to buy a house.
(29:27):
You go go back to sort of the twenty tens.
We're on the five and six own and so like,
that's a whole nother year. The other one that gets
us is again the proportion of your income that you're
having to pay on your mortgage re payments. Average repayments
in twenty twenty early twenty twenty five for Auckland, forty
four percent of your household income would have to go
on the mortgagey payments. It doesn't leave nearly as much
(29:48):
for all the other stuff like tax and food and
energy and the likes. So it is still expensive. I
guess the first point of getting affordability into a better
spot is stopping those numbers going up a whole lot
more rapidly, tick having them stabilize, then starting to have
them push lower The difficulty is if you really wanted
to see like outright affordability in New Zealand, like a
(30:10):
three point or three or four times multiple, you'd have
to massively overbuild. And I think that's the challenge, right, Like,
do you really want to see sort of numerous open
houses in New Zealand that just don't have anyone living
in them?
Speaker 4 (30:21):
Probably not either.
Speaker 5 (30:22):
So it'll take a bit of time for incomes to
eventually catch up to high house prices. But at least
we've stopped things getting quite as crazily out of fashion
as we did the last couple of years.
Speaker 2 (30:32):
Right, We're gonna take quick moment. It's twenty to five
news talk, said b I'm with Brad Olsen. We're talking
about the cash rate having been unchanged, what effect it
has on the market, but also when it comes to
making your decisions, are waiting for a drop in the
cash rate or some other signal that's going to trigger
your gut reaction to think right now is about the
right time? Give us a call on that eighty. It's
(30:54):
twenty to five. Wow, it's very smoozie music to bring
us back into the one Rufradiosha.
Speaker 3 (31:08):
I'm Tim beverage. My guest is Brad Olson.
Speaker 2 (31:12):
Brad, just a quick question around just addressing a question
I can probably answer myself here, but just asking to
explain again how rates get hyped while lower valuations.
Speaker 3 (31:24):
Have come in.
Speaker 2 (31:26):
I mean, it's an easy one to answer, but it's
a lot of people think that if their property goes
up in value, it means therefore their rates go up
and vice versa.
Speaker 5 (31:35):
Yeah, and I mean, look, I think the biggest thing
here is that I almost don't know if we should
publish property valuations. They're not actually useful because everyone thinks
of them in terms of the property of their value. Really,
it's just basically how much of the rates pie you get.
Speaker 7 (31:47):
So if I.
Speaker 5 (31:48):
Mean, let's again take the Awklornd example, we've got the
numbers to hand. If your valuation average valuation's gone down
by nine percent, if your house also went down by
nine percent in valuation, you would pay whatever the average
rates increase was for city, which I think was about
seven percent rates increase. If you had a larger drop,
(32:10):
if your house drops, say fourteen percent instead of the
nine percent average, you would get less of rates rise.
So you'd still probably pay more rates, but it might
only say five percent rates increase rather than a seven
If you had a smaller drop so your house, you know,
went down only by two percent or actually went up
in valuation even though the average went down by nine,
(32:32):
then you would pay even larger rates increases, so it's
more relative to the average. Is the question of sort
of if you pay above average or below average rates increases. Basically,
the way it works is that your counsel will set
how much in terms of the rates bill they need
to collect, however, hundreds of millions of dollars, billions of dollars,
and then they use evaluations to figure out what slice
(32:53):
of the pie are you contributing. But it's not how
much of the pie is increasing, just what sliver are
you contributing?
Speaker 3 (32:59):
Yeah, excellent, good explanation.
Speaker 2 (33:03):
Hey, The question, the question I've got getting back to
the cash rate is you know, we're talking about uncertainty,
and you were mentioning that when it came to the
Reserve Bank's decision and uncertainly around tariffs and etc. And
what's going on, how much of inflation at the moment
is controllable? Because I have the sense that you know,
(33:27):
they worried about if there's too much money in circulation,
then people spending increases and it pushes inflation up. But
I get the feeling that people are having to spend
more on things that they simply have no choice about. I've,
in fact, even personally talk about inflation, talk about inflation,
and all of a sudden, I've had a few bills
come in. I'm going bloody hell. Life's expensive, and it's
(33:48):
it seems that it's had nothing to do with how
much money is sloshing around.
Speaker 4 (33:54):
That's totally true.
Speaker 5 (33:55):
I mean, you've probably been either food shopping or had
to pay an energy bill recently. By the sounds of that,
I mean olive oil prices at twenty five bucks a liter,
chocolate and coffee going up, butter mint, you know, all
the good stuff.
Speaker 4 (34:06):
In a sense, energy cost, inflation, electricity, you gas.
Speaker 5 (34:10):
I think those are both of those figures rising at
the fastest rate they've done in a decade.
Speaker 4 (34:15):
So you're right.
Speaker 5 (34:15):
I mean, those basically essentials and also not necessarily dictated
by the fact that you've got more or less spare
money in your back pocket, right because you've got to
pay for them. You're definitely right on that score. The
worry for the Reserve Bank is that like there's just
so many little price or not so little price increases
coming through. What they're worried about is that if you're
sitting there at home and here's a test almost for you,
(34:38):
tim are you now thinking, because you've got those further
number of bills coming in higher, what do you think
the next set of bills are going to be higher?
Speaker 4 (34:45):
Lower? Or the same?
Speaker 3 (34:47):
Oh?
Speaker 2 (34:49):
I think I'm thinking they're going to be the same.
Speaker 5 (34:51):
Actually, oh, you're a bit more optimistice. This is probably
the difference for the moment is that a lot of
households are seeing those higher numbers and then they're going,
well craky. If the last lot have been higher than before,
then the next lot probably will be even higher again.
And that's I think where basically where the Rezoo Bank
gets to is they're worried about your inflation expectations because
if you think that everything is going to continue to
(35:13):
be higher and higher over time, and that's where we
got a little bit out of kilter the last couple
of years when inflation got high. It's not so much
the actual prices right there themselves that are definitely driving everything.
It's the fact that if that spills over into everything else.
If you think that all the future prices are going
to rise up, that's where you generally stimulate even more inflation.
So you're right, and to be fair, the Reserve Bank's
(35:35):
got to look through some of that. When oil prices
spike overseas because there's conflict in the Middle East, the
Reserve Bank's got to look at that and go, is
that fundamentally going to change people's expectations of everything else
they are going to buy or not. Most of the
time it doesn't because it's short term. It flicks around
something else changes. But if you're having lots of little
items that are again increasing in price, that's just sort
(35:58):
of the worrying point. And for the Reserve Bank, they've
now got headline inflation at two point five percent, that's
getting towards the top of their three percent band. They're
worried that again if they breach that sort of the
limit that they've set themselves, then everyone goes, well, geez.
The Reserve Bank couldn't even sort of, you know, keep
it together for a year or so before things started
to go, hey, wirry again. It's the confidence piece that
(36:19):
they're worried about. So that's the biggest area I think
the Reserve Bank is worrying about. To be clear, they
think that again it comes sort of six to nine
months time, inflationary pressures will drop back. It's just that
if they don't, they don't want to already be trying
to ge up the economy too much. So that's just
that balancing act, the waiting period they're trying to have
At the moment, we often talk about them sort of
watch worrying and waiting in the economy.
Speaker 2 (36:42):
Yeah, to be fair, my optimism was based on gut
instinct and not on any facts.
Speaker 4 (36:50):
You sound like a hidden hope sort of person.
Speaker 2 (36:53):
Let's not tag into that too much. I'll be and
I'll end up in tears. That's eleven minutes to five
news talks.
Speaker 3 (36:59):
They'd be back in a miy.
Speaker 1 (37:01):
The one roof property of the week on the weekend collective.
Speaker 2 (37:06):
Yes, my guest is Brad Olsen, and Brad will be
looking at this property as well. Not necessarily the point
to buy, but we've got a little bit rule this one.
And as I said, it's often like taking a little
holiday and having a window into other people's lives or
the potential lifestyle. You could have this one for Property
of the week is six y three nine a Tofare
and I'll spell that tau Whare Road, Martungy and Wycutter.
(37:28):
It's three bedrooms, two bathrooms. Now, the thing about this property,
it's one hundred and fifty square meter home, which is
you know, it's modest, and I can tell you by
the photos. They love their kitchen.
Speaker 4 (37:38):
Because it's a good kitchen.
Speaker 3 (37:41):
They love the photos. They love the kitchen.
Speaker 2 (37:44):
Should I say, but here it is it's one hundred
and fifty square meter a home, but it includes nine
thousand square meters of land, which basically is a really
really big backyard and a couple of paddocks with cows
in them. So it's just two kilometers outside Martungi Village,
surrounded by unarguably picturesque landscapes, two living areas. And look
(38:07):
the home itself, it's pleasant, it's nice as I sat,
it's got a lovely kitchen. But the cows in the backyard.
It's your sort of thing, possibly brand maybe in another life.
Speaker 5 (38:20):
Yeah, I mean, look, if I was wanting to get
into the primary sector, I guess it's the way that
you'd sort of start off, you know, just just just
deabbling it a bit more. If you're not going to
run cattle though, or some sort of animals to keep
the grass down, it does mean you're going to have
to get one of those really cool right on lawn mowers,
and so I'd.
Speaker 4 (38:37):
Probably be there for it. I reckon that'd be pretty neat,
nice though.
Speaker 5 (38:40):
I mean just the amount of space you've got there
to do sort of whatever you want with it. You know,
you can expand it out, you can go and build
something else. You can you know, banish the kids and
or the spouse, you know, down to some sort of
other dwelling that you put sort of down further on.
It looks like a neat little spot. You're right, though,
I do love the kitchen, nice and just clean. It's
(39:02):
got one of those cooled deep deep sinks, so which
is all good because I'm awful at doing the dishes,
and it's good when you just sort of put them
in and just basically spray it with with with the
hose and just get everything off.
Speaker 4 (39:12):
So yeah, no, love.
Speaker 2 (39:14):
You really you really have handed on that on that
that kitchen there. I suspect those two paddocks you probably
need with the cows there. You probably want a nice,
big deep freeze because I imagine those pet cows, one
of them is going to end up in the freezer
at some stage, aren't aren't they? Because let's face it,
you know we do like our steak from time to time,
don't we, Brad?
Speaker 5 (39:33):
Yeah, But I mean it's the sort of thing again.
You can sort of cater to all options there, right,
you can. You can put a few few fruit trees
in there as well, and you know, have I reckon
it'd be great for you know, summer afternoon, afternoon back
backyard cricket sort of things. You know, you've got a
nice entertaining area. It looks sunny as heck. You know,
you can have some some nice drinks out on the
backyard while everyone sort of plays a bit of you know,
(39:55):
cricket through.
Speaker 4 (39:55):
I think it would be great.
Speaker 2 (39:57):
I'll tell you what, if you ever decide to give
up economics, I think you could have quite a good
career as a real estate agent. Because I went from
being mildly and husiastic about it to thinking, hmm, something
to think about.
Speaker 3 (40:08):
Good on your brad.
Speaker 2 (40:09):
Hey, Brad, we don't really have a lot of time,
but just quickly the banks with their announcement to the
unchanged rate. Is there anything in their behavior that suggests
they believe they believe the Reserve Bank that the rate
will pop down a little bit in the future.
Speaker 5 (40:30):
I mean, they probably gave almost the most explicit guidance
they've been able to give in a while, where they
sort of said, look, if medium term inflation expectations continue
to go in the direction that they think it will,
they will have space to continue to cut their official
cash rate.
Speaker 4 (40:45):
Like in reserve bank terms.
Speaker 5 (40:46):
It doesn't really get any more direct than that that, yes,
they are able to do some more. And I think
probably the biggest one is that are consistent with previously
they've said there's more to come.
Speaker 4 (40:55):
It's in a good space.
Speaker 2 (40:57):
Excellent, Brad Gost. Time flies when you have fun mate.
Thank you so much for coming on the show. That
the fan mail has been rocking in for you. By
the way, I'll share a couple of them with your
later on anyway. That is Brad Olsen, that's wonderf radio show.
Thank you so much for listening. We'll be back next
to Ginny Hale with the parent Squad on dealing with
that wilful child back shortly.
Speaker 4 (41:17):
For more from the Weekend Collective.
Speaker 1 (41:18):
Listen live to News Talk sed B weekends from three pm,
or follow the podcast on iHeartRadio
You're listening to the Weekend Collective podcast from News Talk SIB.
Speaker 2 (00:29):
Yeah, so welcome back to the WONDERFF radio show that
believe it or not, it is a little bit of
James Brown, but without the James Brown because I think
this might be the instrumental part of it.
Speaker 3 (00:36):
But anyway, welcome back to the show.
Speaker 2 (00:38):
This is the Weekend Collective for the twelfth of July. Now,
by the way, if you missed a panel we had
with Bridget Morton and Luke Tala, you can go and
check out wherever you podcast look for the Weekend Collective
on either News Talk said B Dot, COURDA and Z.
Speaker 3 (00:51):
We can go to iHeartRadio.
Speaker 2 (00:52):
Pretty easy to track down and we get each hour
loaded up pretty quickly after the format after it's concluded.
But right now, this is the One roof Radio show.
And he look, he's a familiar guest to us on
our panel, and he's also a familiar voice to many
people who will basically follow the news and especially on
economic issues and all the sorts of things like that.
(01:13):
But I think it might be his first time as
a guest on the One Roof radio show. And if
I say he is Infometric's principal economist and CEO. You
can probably guess that the next two words are going
to be Brad and awesome.
Speaker 4 (01:26):
Brad, gooday, good afternoon.
Speaker 3 (01:28):
How are you.
Speaker 2 (01:29):
You've come into the office. I see you're in Wellington,
but you're actually not sitting at home on you know,
in your living room. You look like you're in your
You're not as big an office as I thought it
would be.
Speaker 5 (01:39):
I'm not slumming it, but I'm an economist him. I mean,
we're still trying to keep costs down in there. You know,
I'm not trying to act like a lawyer and sort
of have overheads bigger than my entire ego. So yeah, no,
and in the office, have a look at the numbers
and looking forward to the next hour of conversation about
what seems to be the most important topic that most
New Zealanders get hot under the collar about the cash rate,
(02:01):
the cash rate, property, everything in between.
Speaker 2 (02:03):
Now, this is the question. We want your calls on
this as well. So the the ocr was left unchanged
this week, and we want to know how much do
you think now as a listener, the question also relates
to you may remember that there was a massive boom
in the property market following COVID and very very very
cheap money, so we saw a deliberate we saw an
(02:24):
absolute effect of cheap money versus property prices. But how
much do you think and we want your calls on
this on eight hundred and eighty eight hundred eighty ten
eighty text nine two nine two. How much do you
think the market is being influenced by the cash rate?
Speaker 3 (02:41):
Right now?
Speaker 2 (02:41):
It's three point two five percent, so I guess people
are borrowing at sort of like high five sort of
around six percent, depending on how long you're in fact,
I haven't checked the latest and straight so you can
update on.
Speaker 3 (02:50):
This us on this, Brad.
Speaker 2 (02:51):
But look we'll firstly so we want your calls and
you can chip in anytime. Eight hundred eighty ten eighty
But Brad, three point twenty five percent unchanged?
Speaker 3 (03:00):
Was this surprise?
Speaker 4 (03:04):
It wasn't a surprise, that's for sure.
Speaker 5 (03:05):
I mean, the market was pretty firm and picking an
expectation for no change, and that was really just because
the last time the Reserve Bank came out back in May,
they decided to cut at that point, but there was
one member who was nervous didn't want to cut it
wanted to sort of hit pause and given some of
the data we'd seen coming out, but more pricing pressure
starting to show through in the economy, economic numbers that
(03:28):
actually were better than the Reserve Bank thought. I'm not
going to say they were great, but they were better
than the Reserve Bank thought. It just seemed to be
a time when the Reserve Bank was going to be
a bit nervous, bit unsure about how quickly it wanted
to continue to bring things back. Also came just a
day or two after the US President made some decisions
around tariffs, which again sent us all into a bit
of a tailspin. Really for the Reserve Bank, they seem
(03:51):
to want to communicate, look, yes, further interest rate cuts
to come. They pretty strongly signaled that in fact earlier
this week, but they also said it not right now.
They just wanted to hit pause and sort of assess
what's coming through because of that uncertainty, because we find
ourselves in this what is quite an awkward position, I think,
where the economy doesn't seem to be doing well.
Speaker 4 (04:11):
You know, talk to.
Speaker 5 (04:12):
Anyone out there at the moment, and no one is
sort of seeing a lot of activity, but pricing pressures
are a bit more intense than you'd usually see in
this part of the economic cycle, and it's the Reserve
Bank's going look both of those uneasy, unfortunate, a bit uncertain,
wanting to just take a breath until August to see
how things land. So they're pretty signal that there's more
to come, but just not right here right now.
Speaker 2 (04:34):
Okay, they've signal that there is more to come? Are
we what does that? I mean, what does that mean?
How much can we read into that? Because they do
choose all their pronouncements and words very carefully, I would
imagine there wouldn't be too many people who are going
to fix long right now with them orgage rates, because
they're going to base it on the fact. Look, I
might just fix for three or six months whatever the
(04:56):
minimum is and wait for the next Reserve Bank announcement.
Speaker 3 (04:59):
But how much can we rely on it?
Speaker 5 (05:01):
Well, I mean, if you go back to this time
last year, I think was when the Reserve Bank was saying,
you know, geez might hike it a little bit further,
and then all of a sudden, you know, come July
last year, they went from going hiking it to cutting
it or thinking about cutting it, and so you sort
of had this pretty big switch around that that had
come through. To be fair, though, I think the Reserve
(05:22):
Bank's pretty clear at the moment. Their forecasts are pretty
consistent that, yes, they think there's probably the ability to
ease a little bit more. That's also what just about
everyone else in the market is pecking. I had a
bit of a look at what the banks are packing
this morning. Most of us, including it for Metrics, we're
packing sort of another interest rate cut down to three percent.
A few others are packing further cuts down to two
(05:44):
point seventy five or two point five percent. So yeah,
there probably is more in there. But and this is
the big thing. If you're sitting out there in the
property market, you've seen two hundred and twenty five bases
points of cuts already, are you really going to wait
for the potential for another sort of twenty five or
fifty like you've done a lot of the heavy lifting.
I say that, Tim because it's really interesting looking at
some of the spending and lending numbers that are coming
(06:06):
through that New Zealanders really are diverging a bit more.
You sort of asked, you know, what would you do?
Although we won't try and do financial advice on the show.
What we can do is highlight some of the trends
that of what New Zealanders are actually refixing on. Up
until April, quite a big focus on the likes of
a two year, one and two year rates. We saw
around about fifty two, sorry, fifty nine percent of new
(06:29):
mortgage lending in the month of April went on one
and two year rates, And I think there was people
who were going, look, just a bit nervous about the
economy where it's sitting, all this tariff talk, wanting a
bit more security. Can lock in my repayments for twenty
four months, I can budget around that, but still a
good proportion around a third ish of mortgages that are
being written in recent times going on floating rates as well. Now,
(06:49):
I think that's the thing you're seeing some people going, look,
I'm happy to wait it out another month or two,
but also a group of people who are saying, look,
it's already pretty good. I'd like to come off my
very high rate at the moment, I'll take something, even
if it's not the absolute rock bottom. It's a lot
better than the sort of six or seven that I
was starting with before so how much.
Speaker 2 (07:08):
Does uncertainty as you've said, Okay, if I go backtrack
a little bit you talked about and we remember how
the Adrian or was saying, look, we might have been hike,
and all of a sudden he was cutting. But that's
an easier decision for the public to digest, so he
could make that sort of u turn, whereas to say
we're going to cut and suddenly hike would be it
would be would be a less very unpalatable.
Speaker 3 (07:31):
Move, wouldn't it?
Speaker 4 (07:33):
Oh totally.
Speaker 2 (07:34):
So what I mean is if they are projecting, I'm
guessing that if they're projecting a drop, then they really
mean it. Whereas he can project raising it and if
he doesn't, everyone's like, oh, well good, you didn't raise it,
you lower it.
Speaker 3 (07:47):
Great news.
Speaker 5 (07:48):
But basically, and I think also at the moment, like
just the fact that they are holding the interest rates
where they are by having no change is I'm not
going to say it's equivalent to a raise, but like
those are the two options at the moment. It's either
drop it further or take a pause. And the taking
a pause but is sort of equivalent to that bit
of all g's those inflationary pressures just look a bit
more intense, and so don't want to get away on ourselves.
(08:11):
Don't want to sort of massively cut interest rates further
to then have to hike them out the other side.
So instead the Reserve Bank seems to be going, look,
we'll take a pause at the moment so we don't
overdo it, but also so that we don't have to
hike later on and sort of bamboos of everyone, because
you're right, that would sort of completely send everyone into
a flat spin. And sort of rightly, so the Reserve
Bank doesn't want to be going back on themselves just
(08:33):
a couple of months later, and so instead they're saying, look,
we're just going to go hands off for a moment.
Speaker 4 (08:37):
We're just going to watch how things evolve.
Speaker 5 (08:39):
But yes, probably if the economy evolves as they expect,
and to be fair, I don't see any reason that
it wouldn't, then yes, they can probably cut interest rates.
But further the questions probably not, is there a further cut.
It's a question of when and how many?
Speaker 2 (08:53):
Well, because if you're talking about I mean some people,
I mean you mentioned, I'm not sure it's your prediction,
but you know, maybe even down to two point five
two point seventy five. That's starting to get really cheap.
I've got to say that as a as a if
I was a first time buyer when we're going to
dig into this, of course, because what effect it has
on the market. Because when we had really really cheap
money back in COVID time, we saw the market go
(09:15):
through the roof.
Speaker 3 (09:17):
So what's your take on it.
Speaker 2 (09:19):
You know, is there a point at which the cash
rate drops to a point you think, oh, that's going
to trigger a bit too much action in the real
estate market.
Speaker 5 (09:28):
Well, I guess that's that's the that's the balance that
the Reserve Bank's trying to bring through because trust me,
if your housing market starts to pick up, so too
does your general economy. But also to such a degree
that again you might sort of stimulate a bit more inflation.
So I feel like we were at at the moment,
it's probably not a bad spot. I mean, I think,
you know, on on for most of the big banks,
you're able to get sort of like a one year
(09:49):
fixed rate around sort of I think four point nine
percent four point eight five, So like there's still a
pretty good rate. I think of your comparison is when
you could get like two point five percent on a
one year mortgage back in twenty twenty. That's a bad
comparison point. We all we'll never get back there. The
OCO will never be that low again. But if you're
(10:09):
sort of looking at things and going, well, I've got
to make sure as well that I can repay a
mortgage on a higher rate because your bank's still going
to test you. It's probably sort of six or seven.
So where we are at the moment probably not the
worst goldilock zone you could find. Yes, a little bit
of sort of change on either side, But I think
it's probably when we get below three percent, when we
start to get into those twos, that you do start
(10:29):
to warm things up in my mind just a bit
too much. And I guess I worry about that because
you look at what's happened to a lot of people
now where they got into the housing market when they
were very very cheap rates. Now the sort of stuck
on much higher rates. Sometimes their properties aren't worth as much.
Like there's some people out there who are doing it
real tough in the housing market because we told them
to go so hard.
Speaker 2 (10:51):
Yeah, I mean, gosh, there must be some people who
are really settled with some pretty horrendous circumstances. Do we
actually do you track the mortgage sales? Sort of figures
because the approach of the banks to mortgage sales is
different than it used to be. Back in the days
where the back of whatever the property sort of paper
was would be pages and pages of black and white photos.
Speaker 3 (11:11):
We don't quite.
Speaker 2 (11:12):
See that these days, despite the fact there'd be a
lot of people who are challenged.
Speaker 5 (11:15):
Do we no looking I haven't looked at the latest
start in the last month or so, but most of
the numbers we've seen coming through, Yes, there's been a
bit of a lift, but sort of like nowhere near
where you're talking around the likes of the GFC and similar.
And that's because you're exactly right. The banks have sort
of changed their ways from two points of view. One,
everyone's way happier to go and sort of work with
(11:36):
their customers. If you're a bank, you don't want to
sort of foreclosed or anything like that, so you're trying
to work with people around their repayments or figure out
sort of what options are the year. It's also why
you've got a lot of properties on the market at
the moment I think it is something like half a
year's worth of sales out there, and that's because people
don't want to do a mortga g sale, so they're
trying to move their house along themselves before.
Speaker 4 (11:57):
Things get even worse.
Speaker 5 (11:58):
But probably most importantly is that you know, to a degree,
we've sort of saved some people from themselves as well.
We had those test rates the last couple of years
that meant that, look, if you were going to go
and buy a house, you got tested at a higher
rate than what you'd actually repay the mortgage at a
lot of people at the time said that's not fair.
I can afford the mortgage rate right here, right now.
Don't test me at that eight percent or so, don't
(12:19):
test me at seven. I want to get the mortgage.
But we've probably ensured that there is less vulnerability, that
there are more people who can actually legitimately repay their
mortgages sort of each and every week. And so again,
you're right, the dynamics have changed.
Speaker 2 (12:31):
How much do you think that that testing for vulnerability
and maybe making sure there are fewer people who are
in a vulnerable position because they've over committed. How much
has that change affected just the interest in the market.
Speaker 4 (12:45):
Oh, I mean, I think there's been a bit of it.
Speaker 5 (12:47):
I think it more likely it's sort of kneecapped a
few of those that were probably generally younger buyers and
didn't have quite the same level of a deposit. It'd
be those guys that have probably I think, get locked
out a lot more. But again, I mean, you look
at some of the trends this year, and geez, things
move around so much. When the likes of the tariffs
came through in April, some people lost probably a couple
(13:10):
thousand dollars worth of their deposit that they were thinking
to use for a property. So again, sort of all
of that vulnerability you've just seen the system try and
limit to just how much is coming through. Same with
some of the loan to value ratio restrictions and similar
they've actually in recent times acted as a fairly reasonable
handbreak on the housing market getting too too much further
(13:32):
out of hand. You are starting to see momentum tack up.
I think that's hour thing. Like you look at property,
it's not like it's completely and utterly in the doll drums. Yes,
it's down on that peak, but it's starting to pick
up a little bit of momentum, slowly but surely, And
I actually think that's good for New Zealand's property market.
If it's going in leaps and bounds all the time,
if property prices are just surging, you get a whole
lot of people who can't enter the market. And similar
(13:54):
if it's going a little bit more steady as she goes,
then you just sort of breed that level of confidence
that yes, it might not be the biggest money spinner immediately,
but actually I think I've still got the potential to
get in.
Speaker 2 (14:05):
To dig in, we're going to dig into that a
little bit about facts versus emotion as well, because when
you talk about momentum in the market and things picking
up or not, how do economists, people in your position
do you ever take into account?
Speaker 3 (14:20):
I mean there's always.
Speaker 2 (14:21):
Facts, figures and numbers, and then there's hysteria fomo or
what's the other one for over.
Speaker 3 (14:28):
Foop or fomo?
Speaker 2 (14:30):
How much do you how much do you think that
emotions play a part in what a market is doing?
For instance, if I flesh that out of it at
the moment. You know, recently we had the headline from
I think was caautality. You said that in twenty thirty
something the market was in real term is going to
be worth twenty percent less than it is now. I
might have got that slightly wrong or not, but the
(14:51):
headlines haven't been great, so people store that away and
then they have an emotional reaction to it and that
affects the market.
Speaker 3 (14:58):
What do you reckon?
Speaker 5 (14:59):
Oh yeah, look, I mean certainly in the New Zealand
housing market, people's sort of perceptions and expectations, the vibes.
Speaker 4 (15:05):
The vibes matter.
Speaker 5 (15:05):
I mean, economists talk about animal spirits, but look, every
day punt is that they're going to be sitting there.
And you react to some of the big and I
think it's sort of almost more formal news that you get.
I remember, for example, when Auckland's latest valuations came out
nine percent down.
Speaker 4 (15:20):
Now, like in my mind, I thought that.
Speaker 5 (15:23):
Everyone knew that house provices were down, like unless you've
been living under a rock. We've been talking about that
for the last couple of years, that housing prices in
you know, in Auckland had fallen back. But there seemed
to be this a little bit of hysteria around the
nine percent drop because it was formal, all of a sudden,
you know, Auckland Council were saying it and the property
providers were sort of taking that into account.
Speaker 4 (15:44):
But I think it's because people need.
Speaker 5 (15:45):
A bit of a benchmark and and sort of it's
hard to get an idea of how much is this
property worth because the only time you know how much
a property is worth is when someone buys it, or
when you're told by some site, including the valuation ones,
that it's worth probably thumbsuck this much money. So those
numbers do have a big important sort of role in
how people dictate there at terms. What I think is
(16:07):
challenging though, right is you've got, in my mind, sort
of two sets of buyers and sellers out there at
the moment. One set are people that they've got a seal,
they need to move stuff along. They're having to sort
of put their property price in line with what the
market will pay, which means that if you're a buyer,
you know that there's a lot of properties out there,
you don't have to sort of have that same level
of fomo because at the moment there's quite a lot
(16:29):
of properties. You can sort of take your pick and
you can negotiate everyone around. There's a second group though,
of sellers who they saw a number back in twenty twenty,
twenty twenty one the highest number they've ever seen for
their property, and they will not take a cent less
for it ever, even though the market is completely changed,
even though interest rates are still higher than sort of
at those low points. So it does, I think matter,
not even at the margins, but overall that Yes, the
(16:51):
vibes of the housing market does have an influence.
Speaker 2 (16:54):
Okay, well, look, we love your cause on this as well.
There are two questions really, one of those how much
does your attitude to the real estate market count on
your own gut instinct or is your gut instinct ultimately
just related to getting the facts in a way sort
of running with the hairs, hunting with the hounds on this,
because I've talked about gut instinct.
Speaker 3 (17:14):
But then, as Brad said, people.
Speaker 2 (17:16):
Reacted to the news of the devaluations of people's properties
with shock, but it was maybe it was just that
their gut instinct finally got them some facts to rely on.
So what you know what prevails when it comes to
your decisions on this, because in the end, we weigh
up our decision making based on a whole lot of
numbers and then we go, well I'm in or I'm out?
So how much does gut instinct player a role for you?
(17:39):
But also the OCI was left unchanged this week. Do
you think it's going to have any material effect on
the market and the activity or are you waiting for
it to drop before you get into it again? Oh
eight hundred eighty ten eighty text nine two nine too,
of course, Brad, And here I will continue to exchange
a few ideas, but you can jump in and crash
the conversation right now in eight hundred and eighty ten
(18:01):
eighty it's twenty four past four. Yeah, right, what then?
Speaker 3 (18:20):
Yes? Indeed? And we are German as well?
Speaker 2 (18:23):
Or should I say in my own way jammin it
doesn't sound quite the same anyway.
Speaker 3 (18:27):
I'm Tim Beverriges. Is Wonderfridie sham my guest, it's Brad awesome.
Speaker 2 (18:30):
We're talking about the three point twenty five cash rate unchanged?
What does it mean for the market? If anything? Is
it going to just keep things a little bit sluggish?
Or you know, are you seeing?
Speaker 3 (18:41):
Yeah?
Speaker 2 (18:41):
I mean how long are you what's what are your
what's going to going to take for you to get
into the market well, and how much of that is
also based on got instinct and taking your calls on
our eight hundred eighty ten eighty let's go to Winton.
Speaker 3 (18:53):
Get a.
Speaker 6 (18:55):
Yes, good afternoon. I wondered if Bread could tell it
sister banks are using we get through income ratios and
where are all these people that can apparently afford quite
easily one and a half million dollar houses two million
(19:16):
dollar houses? Could bad tell us if you're I mean
one and a half million just seems to be average
these days? What sort of income would you need to
print up to the bank on net one?
Speaker 2 (19:29):
Okay to income? And also who's got one and a
half million bucks?
Speaker 3 (19:33):
Brad yep?
Speaker 5 (19:34):
No, both both great questions. I mean, look, I certainly
to answer the second one. I don't have one point
five mill that's that's for sure, or the income to
get there. I think part of it is that you
see a lot of people talking about those one point
five million houses smilar Actually the number of people that
are actually buying in their area is somewhat lower, shall
we say. I mean you look at the likes of
(19:56):
the average house and this is the average in Auckland.
You're sort of talking more around one point two mill
at the moment, which is still a lot. But when
you take into a count you know at that sort
of range you're needing. I mean that there's a fair
bit of income that has to come forward. But you're
also talking household income. It's not personal. And so if
you've got a few people together, if you've got a
(20:17):
couple two people on decent jobs, if you've got maybe
the ability to bring in a border or similar and
we know that a lot of banks often ask about that,
then that's how you often get some of those bigger
property purchases over the line. But the other point I
think to make is that a lot of people are
still buying below that average price. I mean in Auckland,
you can still pick up houses in that sort of
(20:38):
seven eight, you know, nine.
Speaker 4 (20:41):
Hundred dollar range.
Speaker 5 (20:41):
Even lower than that's still around sort of five point
fifty if you're able to find the right thing. And
so it means that spread over all of that, yes,
you can definitely find those opportunities.
Speaker 4 (20:50):
The likes of the Reserve.
Speaker 5 (20:51):
Bank is lending out with those debt to income ratios.
The rules at the moment are that for own your
owner occupier, So if you live in the house yourself
that you're buying. Only twenty percent of lending to owner
occupiers can be where you've got a debt to income
ratio of more than six, so you can borrow above
six times that household income. For investors, it's twenty percent
(21:15):
for a DTI of over seven or neate. That's gross
from memory. But like I say that the big one
that often makes a big difference at the moment. I
know talking to a lot of people both who want
to buy, but also in the banking sector, is that
additional income's a big one. If you can sort of
convince or tell your bank that you've got a border
(21:35):
or a flatmate or a rent or someone coming in,
that's a whole Generally, third income, if you're thinking about
a couple, that starts to boost you forward. You've got
some of the if you've got a family, you've got
some of the tax credits from government. So I'm not
going to say it's easy to get into a house.
I don't think that's ever true. But the DTI certainly
aren't massively limiting people at the moment. Also because those
(21:56):
house prices are a bit lower than they were a
couple of years ago. If we were going back and
sort of talking about this in twenty twenty, twenty twenty
one would be having a whole different story because there
was a lot of very high value lending, but now
at the moment not a big constraint because of course
house values a bit lower income still going up and
people able to generally make it work if they've got
a few people in the offing together.
Speaker 3 (22:18):
Anything, anything.
Speaker 6 (22:21):
That's an incredibly complete answer, wonderful.
Speaker 2 (22:26):
Wonderful, We'll get them back sometime.
Speaker 3 (22:30):
Got on your wins. Things actually funny enough for Brad.
Speaker 2 (22:34):
I'm not sure if you've got a few people listening
to the show who are anticipating you, who are fans,
because I did have quite a few texts when I
announced that you were coming up, and one of them
just said the exceptional Brad Olsen coming up. Can't wait
to listen. Then another one I mean, yeah, so there
we go. I thought I passed Tim, you didn't.
Speaker 5 (22:54):
You didn't have me on the panel, so it could
have been me listening in and texting in myself.
Speaker 4 (22:58):
I'm kidding, I'm not. I'm not that vain jeepers hey.
Speaker 5 (23:00):
But nice to hear that people are interested out there
because I sometimes feel like in this role there's a
there's a lot of pretty tough stuff that we talk about.
I mean, economists are the dismal science. So it's nice
to hear that people are a little bit engaged, because
I could definitely sort of see a fear number of
people sitting out there going, God, it's the doom merchant
again talking about how the economies were stuffed.
Speaker 3 (23:18):
Brad. I actually, to be honest, you do.
Speaker 2 (23:20):
I'm not going to be overly complimentary, but you never
sound like a doom merchant, even when if you're giving
us pessimist at news. Of course, it's the thing is
things are backed up with a good with good facts
and context and things. I always think that, you know,
as opposed to this is the problem with the media
is that often people look at headlines and if you're
judging the property market by headlines, you're either feeling ecstatic,
(23:43):
panicked or depressed.
Speaker 3 (23:45):
And I like to say, you know, whereas it's when.
Speaker 2 (23:47):
We get the context for things that it helps so
so good on you anyway, I meant that without the laugh,
actually meant it genuinely.
Speaker 7 (23:56):
Kevin, Hello, Hi, we should be more focused on how
and why not these numbers in the housing market. I mean,
why all our economy is down because how the dynamism
the young people and the education are leaving and would
give preference to speculators over the educated and the industrious.
(24:19):
I mean, what sort of economy is that. It's something
that suits Australia. It doesn't suit in New Zealand.
Speaker 2 (24:26):
Are we giving preference to speculators these days?
Speaker 3 (24:28):
I don't know if we are.
Speaker 7 (24:30):
Do you text a pugeon or adoptor or nurse? And
how much do you text capital?
Speaker 8 (24:35):
I mean I don't want to. I just want parity
between education and effort and diamond enterprise over sitting back
and I mean having money.
Speaker 7 (24:47):
It's not a.
Speaker 8 (24:48):
Skull or the virtue. It's probably a bit of luck
or a bit of fortune.
Speaker 2 (24:54):
Okay, interesting, Kevin, what do you reckon?
Speaker 3 (24:55):
Brad?
Speaker 4 (24:57):
Oh? Look, I'm totally an agreement.
Speaker 5 (24:59):
I thought for a while that we should, you know,
text capital gains and similar. I think right at the moment,
I don't. I think the markets sort of being overly
providing to you know, anyone who wants to speculate around
housing and similar And look, if you have a look
into the numbers, the number of and sort of lending
to property investors isn't amazing. It's certainly coming up a bit,
(25:20):
and that's natural, and interest rates have come a bit lower,
but it's not sort of at the heaty highs that
it was a couple of years back when you were
really were seeing the pressure in the housing market. And
I think actually the biggest one that encourages me there
is the fact that you're seeing not only more houses
and similar on the market, which is allowing you know,
first home buyers and the likes in not saying it's easy,
but again the pathway is not as awful as it
(25:42):
once was. But it's actually the rental market that that
I find really fascinating, where you've actually now got in
some areas rents that are effectively falling. So you know,
for some people up and coming, they're able to get
a cheaper, more affordable rental to come in that hopefully
means they can save up a bit more money. They
might well again be able to get into that slightly
cheaper than a couple of years ago house. But look,
(26:04):
the long whom trenders is totally right that we can't
let ourselves get back into the position where people are
just going to make sort of money hand over fist
by putting the money into property rather than ewhere else. One,
it doesn't do good for the rest of the economy
because we're not able to fund as much advancement in
other areas. And two it does make it more difficult
to keep people here. I mean, we saw numbers this
(26:25):
week showing that we've got a massive net outflit of
kiwis to Australia and other parts of the world.
Speaker 4 (26:30):
So we've got to keep that in mind.
Speaker 5 (26:31):
But I think at the moment we're actually probably in
a bitter spot on the housing market than we've been
for a couple of years.
Speaker 4 (26:37):
You know.
Speaker 2 (26:38):
The thing I think this is again where where we
get a skewed version of the property market. I'm not
saying from you, Brad and from the headlines talking about
somebody flicked on a property, and people used to talk about, oh,
those people are just flicking on property and making money
out of.
Speaker 3 (26:51):
It as if it's easy.
Speaker 2 (26:53):
And because people who try flipping a property or doing
a quick trade, we don't really hear from them when
they make a loss, when they get bitten by cheap
interest rates. And I would say there would be a
lot of people, because if it's easy, then you'd all
do it. But it's not easy because the stakes are
massive and if you get it wrong and the market turns,
(27:14):
you're done, aren't you.
Speaker 4 (27:15):
Well, absolutely, and I think you're totally right.
Speaker 5 (27:17):
We do this all the time, right, there's always sort
of we report on certain parts of a story or
certain sides of the coin a lot more than otherwise.
So yes, we hear a lot about some of those
you know, speculators who'd flip houses, and especially because normally
they are the sort of people that are very loud
and proud about it, they don't talk about even the
losses that they'd have, and they would have losses, that's
(27:38):
just the name of the game. But I think that's
that's the difference, is that you've probably got a lot
of people out there who might give it a go
once or twice and just looking and.
Speaker 4 (27:44):
Go I can't make that work.
Speaker 5 (27:47):
And I guess the difference as well, and this is
a real, like sort of genuine concern, is that we
do also need to split up the pure speculators from
general investors, like some of those investors, you know, the
other people that provide rentals for a lot of people
across the country.
Speaker 4 (28:02):
That is an important service.
Speaker 5 (28:04):
Now I'm not saying that I think that anyone should
be making more money again year on year by just
moving property, be it a speculator and a vestor or
otherwise more than a person at least have made a
flesh and bone. But there are sort of different groups,
and I worry that sometimes we candense investors, speculators and
otherwise all in together and they are different.
Speaker 2 (28:24):
Just a quick question. This again, this is a related sentiment.
So a lot of the headlines talking about the markets,
you know, being slow, and it's come back a lot,
and it might still in real turns be worth a
bit less than the years to come. But then you
get people who haven't been involved in the market, they've
been renting property. Is it still expensive, isn't it?
Speaker 4 (28:45):
Oh yeah, oh.
Speaker 5 (28:46):
Yeah, this I mean, like the numbers are huge, Yeah, definitely.
I mean if you look at the likes of and
let's use it's still not the best measure ever. I
get that, But you look at some of the affordability
stats and look, we'll all stick with Auckland because it's
the biggest market. We talk about it all the time
at the moment, you're still need to say or basically
(29:07):
spend four points sorry, seven point four times your whole
entire household income to buy the average Auckland property. But
that's a lot of Basically, if you told an entire
household to stand still for nearly eight years, paid nothing,
food like absolutely nothing, and saved absolutely every penny, they
still would take nearly eight years to buy a house.
(29:27):
You go go back to sort of the twenty tens.
We're on the five and six own and so like,
that's a whole nother year. The other one that gets
us is again the proportion of your income that you're
having to pay on your mortgage re payments. Average repayments
in twenty twenty early twenty twenty five for Auckland, forty
four percent of your household income would have to go
on the mortgagey payments. It doesn't leave nearly as much
(29:48):
for all the other stuff like tax and food and
energy and the likes. So it is still expensive. I
guess the first point of getting affordability into a better
spot is stopping those numbers going up a whole lot
more rapidly, tick having them stabilize, then starting to have
them push lower The difficulty is if you really wanted
to see like outright affordability in New Zealand, like a
(30:10):
three point or three or four times multiple, you'd have
to massively overbuild. And I think that's the challenge, right, Like,
do you really want to see sort of numerous open
houses in New Zealand that just don't have anyone living
in them?
Speaker 4 (30:21):
Probably not either.
Speaker 5 (30:22):
So it'll take a bit of time for incomes to
eventually catch up to high house prices. But at least
we've stopped things getting quite as crazily out of fashion
as we did the last couple of years.
Speaker 2 (30:32):
Right, We're gonna take quick moment. It's twenty to five
news talk, said b I'm with Brad Olsen. We're talking
about the cash rate having been unchanged, what effect it
has on the market, but also when it comes to
making your decisions, are waiting for a drop in the
cash rate or some other signal that's going to trigger
your gut reaction to think right now is about the
right time? Give us a call on that eighty. It's
(30:54):
twenty to five. Wow, it's very smoozie music to bring
us back into the one Rufradiosha.
Speaker 3 (31:08):
I'm Tim beverage. My guest is Brad Olson.
Speaker 2 (31:12):
Brad, just a quick question around just addressing a question
I can probably answer myself here, but just asking to
explain again how rates get hyped while lower valuations.
Speaker 3 (31:24):
Have come in.
Speaker 2 (31:26):
I mean, it's an easy one to answer, but it's
a lot of people think that if their property goes
up in value, it means therefore their rates go up
and vice versa.
Speaker 5 (31:35):
Yeah, and I mean, look, I think the biggest thing
here is that I almost don't know if we should
publish property valuations. They're not actually useful because everyone thinks
of them in terms of the property of their value. Really,
it's just basically how much of the rates pie you get.
Speaker 7 (31:47):
So if I.
Speaker 5 (31:48):
Mean, let's again take the Awklornd example, we've got the
numbers to hand. If your valuation average valuation's gone down
by nine percent, if your house also went down by
nine percent in valuation, you would pay whatever the average
rates increase was for city, which I think was about
seven percent rates increase. If you had a larger drop,
(32:10):
if your house drops, say fourteen percent instead of the
nine percent average, you would get less of rates rise.
So you'd still probably pay more rates, but it might
only say five percent rates increase rather than a seven
If you had a smaller drop so your house, you know,
went down only by two percent or actually went up
in valuation even though the average went down by nine,
(32:32):
then you would pay even larger rates increases, so it's
more relative to the average. Is the question of sort
of if you pay above average or below average rates increases. Basically,
the way it works is that your counsel will set
how much in terms of the rates bill they need
to collect, however, hundreds of millions of dollars, billions of dollars,
and then they use evaluations to figure out what slice
(32:53):
of the pie are you contributing. But it's not how
much of the pie is increasing, just what sliver are
you contributing?
Speaker 3 (32:59):
Yeah, excellent, good explanation.
Speaker 2 (33:03):
Hey, The question, the question I've got getting back to
the cash rate is you know, we're talking about uncertainty,
and you were mentioning that when it came to the
Reserve Bank's decision and uncertainly around tariffs and etc. And
what's going on, how much of inflation at the moment
is controllable? Because I have the sense that you know,
(33:27):
they worried about if there's too much money in circulation,
then people spending increases and it pushes inflation up. But
I get the feeling that people are having to spend
more on things that they simply have no choice about. I've,
in fact, even personally talk about inflation, talk about inflation,
and all of a sudden, I've had a few bills
come in. I'm going bloody hell. Life's expensive, and it's
(33:48):
it seems that it's had nothing to do with how
much money is sloshing around.
Speaker 4 (33:54):
That's totally true.
Speaker 5 (33:55):
I mean, you've probably been either food shopping or had
to pay an energy bill recently. By the sounds of that,
I mean olive oil prices at twenty five bucks a liter,
chocolate and coffee going up, butter mint, you know, all
the good stuff.
Speaker 4 (34:06):
In a sense, energy cost, inflation, electricity, you gas.
Speaker 5 (34:10):
I think those are both of those figures rising at
the fastest rate they've done in a decade.
Speaker 4 (34:15):
So you're right.
Speaker 5 (34:15):
I mean, those basically essentials and also not necessarily dictated
by the fact that you've got more or less spare
money in your back pocket, right because you've got to
pay for them. You're definitely right on that score. The
worry for the Reserve Bank is that like there's just
so many little price or not so little price increases
coming through. What they're worried about is that if you're
sitting there at home and here's a test almost for you,
(34:38):
tim are you now thinking, because you've got those further
number of bills coming in higher, what do you think
the next set of bills are going to be higher?
Speaker 4 (34:45):
Lower? Or the same?
Speaker 3 (34:47):
Oh?
Speaker 2 (34:49):
I think I'm thinking they're going to be the same.
Speaker 5 (34:51):
Actually, oh, you're a bit more optimistice. This is probably
the difference for the moment is that a lot of
households are seeing those higher numbers and then they're going,
well craky. If the last lot have been higher than before,
then the next lot probably will be even higher again.
And that's I think where basically where the Rezoo Bank
gets to is they're worried about your inflation expectations because
if you think that everything is going to continue to
(35:13):
be higher and higher over time, and that's where we
got a little bit out of kilter the last couple
of years when inflation got high. It's not so much
the actual prices right there themselves that are definitely driving everything.
It's the fact that if that spills over into everything else.
If you think that all the future prices are going
to rise up, that's where you generally stimulate even more inflation.
So you're right, and to be fair, the Reserve Bank's
(35:35):
got to look through some of that. When oil prices
spike overseas because there's conflict in the Middle East, the
Reserve Bank's got to look at that and go, is
that fundamentally going to change people's expectations of everything else
they are going to buy or not. Most of the
time it doesn't because it's short term. It flicks around
something else changes. But if you're having lots of little
items that are again increasing in price, that's just sort
(35:58):
of the worrying point. And for the Reserve Bank, they've
now got headline inflation at two point five percent, that's
getting towards the top of their three percent band. They're
worried that again if they breach that sort of the
limit that they've set themselves, then everyone goes, well, geez.
The Reserve Bank couldn't even sort of, you know, keep
it together for a year or so before things started
to go, hey, wirry again. It's the confidence piece that
(36:19):
they're worried about. So that's the biggest area I think
the Reserve Bank is worrying about. To be clear, they
think that again it comes sort of six to nine
months time, inflationary pressures will drop back. It's just that
if they don't, they don't want to already be trying
to ge up the economy too much. So that's just
that balancing act, the waiting period they're trying to have
At the moment, we often talk about them sort of
watch worrying and waiting in the economy.
Speaker 2 (36:42):
Yeah, to be fair, my optimism was based on gut
instinct and not on any facts.
Speaker 4 (36:50):
You sound like a hidden hope sort of person.
Speaker 2 (36:53):
Let's not tag into that too much. I'll be and
I'll end up in tears. That's eleven minutes to five
news talks.
Speaker 3 (36:59):
They'd be back in a miy.
Speaker 1 (37:01):
The one roof property of the week on the weekend collective.
Speaker 2 (37:06):
Yes, my guest is Brad Olsen, and Brad will be
looking at this property as well. Not necessarily the point
to buy, but we've got a little bit rule this one.
And as I said, it's often like taking a little
holiday and having a window into other people's lives or
the potential lifestyle. You could have this one for Property
of the week is six y three nine a Tofare
and I'll spell that tau Whare Road, Martungy and Wycutter.
(37:28):
It's three bedrooms, two bathrooms. Now, the thing about this property,
it's one hundred and fifty square meter home, which is
you know, it's modest, and I can tell you by
the photos. They love their kitchen.
Speaker 4 (37:38):
Because it's a good kitchen.
Speaker 3 (37:41):
They love the photos. They love the kitchen.
Speaker 2 (37:44):
Should I say, but here it is it's one hundred
and fifty square meter a home, but it includes nine
thousand square meters of land, which basically is a really
really big backyard and a couple of paddocks with cows
in them. So it's just two kilometers outside Martungi Village,
surrounded by unarguably picturesque landscapes, two living areas. And look
(38:07):
the home itself, it's pleasant, it's nice as I sat,
it's got a lovely kitchen. But the cows in the backyard.
It's your sort of thing, possibly brand maybe in another life.
Speaker 5 (38:20):
Yeah, I mean, look, if I was wanting to get
into the primary sector, I guess it's the way that
you'd sort of start off, you know, just just just
deabbling it a bit more. If you're not going to
run cattle though, or some sort of animals to keep
the grass down, it does mean you're going to have
to get one of those really cool right on lawn mowers,
and so I'd.
Speaker 4 (38:37):
Probably be there for it. I reckon that'd be pretty neat,
nice though.
Speaker 5 (38:40):
I mean just the amount of space you've got there
to do sort of whatever you want with it. You know,
you can expand it out, you can go and build
something else. You can you know, banish the kids and
or the spouse, you know, down to some sort of
other dwelling that you put sort of down further on.
It looks like a neat little spot. You're right, though,
I do love the kitchen, nice and just clean. It's
(39:02):
got one of those cooled deep deep sinks, so which
is all good because I'm awful at doing the dishes,
and it's good when you just sort of put them
in and just basically spray it with with with the
hose and just get everything off.
Speaker 4 (39:12):
So yeah, no, love.
Speaker 2 (39:14):
You really you really have handed on that on that
that kitchen there. I suspect those two paddocks you probably
need with the cows there. You probably want a nice,
big deep freeze because I imagine those pet cows, one
of them is going to end up in the freezer
at some stage, aren't aren't they? Because let's face it,
you know we do like our steak from time to time,
don't we, Brad?
Speaker 5 (39:33):
Yeah, But I mean it's the sort of thing again.
You can sort of cater to all options there, right,
you can. You can put a few few fruit trees
in there as well, and you know, have I reckon
it'd be great for you know, summer afternoon, afternoon back
backyard cricket sort of things. You know, you've got a
nice entertaining area. It looks sunny as heck. You know,
you can have some some nice drinks out on the
backyard while everyone sort of plays a bit of you know,
(39:55):
cricket through.
Speaker 4 (39:55):
I think it would be great.
Speaker 2 (39:57):
I'll tell you what, if you ever decide to give
up economics, I think you could have quite a good
career as a real estate agent. Because I went from
being mildly and husiastic about it to thinking, hmm, something
to think about.
Speaker 3 (40:08):
Good on your brad.
Speaker 2 (40:09):
Hey, Brad, we don't really have a lot of time,
but just quickly the banks with their announcement to the
unchanged rate. Is there anything in their behavior that suggests
they believe they believe the Reserve Bank that the rate
will pop down a little bit in the future.
Speaker 5 (40:30):
I mean, they probably gave almost the most explicit guidance
they've been able to give in a while, where they
sort of said, look, if medium term inflation expectations continue
to go in the direction that they think it will,
they will have space to continue to cut their official
cash rate.
Speaker 4 (40:45):
Like in reserve bank terms.
Speaker 5 (40:46):
It doesn't really get any more direct than that that, yes,
they are able to do some more. And I think
probably the biggest one is that are consistent with previously
they've said there's more to come.
Speaker 4 (40:55):
It's in a good space.
Speaker 2 (40:57):
Excellent, Brad Gost. Time flies when you have fun mate.
Thank you so much for coming on the show. That
the fan mail has been rocking in for you. By
the way, I'll share a couple of them with your
later on anyway. That is Brad Olsen, that's wonderf radio show.
Thank you so much for listening. We'll be back next
to Ginny Hale with the parent Squad on dealing with
that wilful child back shortly.
Speaker 4 (41:17):
For more from the Weekend Collective.
Speaker 1 (41:18):
Listen live to News Talk sed B weekends from three pm,
or follow the podcast on iHeartRadio
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