June 4, 2025 • 26 mins
Independent economist Tony Alexander is back to give us the lowdown on the housing market, interest rates, and what’s driving investment sentiment in 2025.
He unpacks why lending is still lagging behind 2021 levels, despite a lift in business and consumer credit, and why the cost of living remains stubbornly high, with some commodity prices reportedly up around 17%.
Why are private debt levels looking lower in the South Island than in the North? What happened to the housing market recovery some expected late last year? And why does Tony believe interest rates could be close to hitting their floor?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Junokoto. Welcome to shared lunch. I'm Garth Bray. Well winter
is here not normally a boomer of a time for
our property market, and the Reserve Bank is sounding a
little loop warm about easing rates. Further so, what lies
ahead for us? Time to check in with that sage
of the savvy property investor, Tony Alexander see what he thinks.
But before that, it's some important information you should always
(00:26):
consider before investing.
Speaker 2 (00:28):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 1 (00:42):
Tony, A rare pleasure to have you here face to
face in Auckland. Love to have you with us. Yep.
I'll get to the Reserve Bank in a second. But
the centric starter that we've seen out very recently, the
credit reporting stuff that shows business and consumer credit up.
I mean it's not the lending is not where it
was in twe but is that the first sign that
things are getting better or is it still not looking great?
Speaker 3 (01:04):
Oh? We're economists don't generally look at the lending data
for a sign of what's happening in the economy. We
tend more to look at leading indicators, what's happening with
consumer sentiment, business sentiment, these sort of things, investment, intensions,
employment and tensions. So definitely interesting there. But for instance,
if you look at the reserve banks lending numbers, the
volume of lending to the farming sector is down about
(01:27):
one percent or so on a year earlier. So do
we look at that and go, farming's falling away. It's
all getting really really bad, while not with commodity prices
up about seventeen percent on a year earlier.
Speaker 1 (01:36):
So they're probably just paying off debt, aren't they. Because
things are so good that it's actually a healthy sign.
Speaker 3 (01:41):
That's relevant because if we talk about the good returns
being made by the farmers, oh, the region's going to boom.
Rural towns are going to absolutely boom. Right, that's where
I'm going to do my property investment. Yeah, we'll just
remember the costs for operating a farm have gone through
the roof in recent years. And yeah, they've been getting
a voice in their ear to pay down debt for
a long time. So the actual region stimulus. It's going
to be there, but it's not really going to be
(02:02):
what it's been in the past coming out of recessions.
Speaker 1 (02:04):
Just on that though, I looked at that Centrix data
and there was like a heat map of how badly
in areas, how badly behind people are. She was lush
green all up the South Island, all in single digits.
You get up into pretty much the whole of the
North Island was a bit of an orange, and you
get to Bay of Plenty, you get to the coast Titaffity,
it was red and we're talking like seventeen eighteen percent,
(02:26):
you know, in an areas and sign that's not a
healthy sign. That's a two track economy, there isn't it.
Speaker 3 (02:31):
Well, yeah, for the moment, I think it does look
like that, And in a way it's sort of a
payback and a broad sense from earlier on when we
saw from a housing market perspective, things were growing really
strongly in the North Island but not in the South Island.
I used to talk a lot about it that this
boom and house prices. There was some in the South Island,
but it wasn't as much as in the North Island,
(02:51):
and so if we extrapolate that to businesses in general,
probably you've got more businesses getting over optimistic in the
North Island than the South Island during the boom, and
so when you get the type monetary policy occur, there's
more weeding out to do in the business sector, maybe
residential property investment market in the North Island than the
South Island. So that's sort of what I would put
(03:12):
it down to. I wouldn't over extrapolate that towards right
New Zealand's future for the next hundred years. It's back
to the South Island. This population imbalanced twenty five percent
in South Island or so seventy five percent North. It's
going to reverse yet, No, it's just a bit of
a cyclical thing from that earlier on boom which was
more in the North.
Speaker 1 (03:30):
It just must be anecdotes that I keep running into
people that are moving to christ Church the end to
try and ditch the Auckland property prices.
Speaker 3 (03:35):
Well, that's definitely happening and it's going to keep happening
as well.
Speaker 1 (03:38):
Yeah, yeah, I mean liquidations in some of that data
were quite high. Business liquidations. We're talking like thirty percent
I think was it up on year on year. That's
not good.
Speaker 3 (03:46):
Yeah, yeah, definitely not good. But this is what I
warned about from twenty twenty two. In fact, as early
as the first half of twenty twenty one, I was
warning residential builders just watch out. There's a boom underway.
Lots of inexperienced, undercapitalized people are entering the residential construction sector,
as widely defined, and there's going to be a weeding
out period somewhere down the track. And then I morphed
(04:08):
that into talking about over twenty twenty three of this
weeding out is going to be across all sectors of
the economy in twenty twenty four. And so that's what
we saw with liquidations up et cetera last year. And
then of course I was warning strongly from August last
year when we saw the interest rates were coming down.
A journalist wrote, We're going to be a rockstar economy again,
and I thought, what a load of absolute rubbish. There
(04:29):
are going to be businesses that are going to be
caught out and some of the weakness we see in
the economy at the moment. It's the reality check as
I think businesses are realizing, oh, who was right? This
isn't a boom. We survived to twenty five, it's not enough.
And some businesses, either from their own volition or the
ird or the bank the creditors are realizing we can't
make it.
Speaker 1 (04:49):
If we don't have a boom.
Speaker 3 (04:51):
Then, given the cost we've got going up, the massive
margin compression, we've got to close down. And so that
weeding out process is still rolling through twenty twenty five. Actually,
as the CENTRIC data showed in the construction sector, where
there was a much sharper increase in number of liquidations
sort of trending upwards in the past three years compared
with other sectors like retail, hospitality.
Speaker 1 (05:11):
Because broadly, I think this month that actually turned, or
last month it's turned, and it almost looks like the
worm is turning down. The liquidations might just be starting
to trend down. You don't think it's over.
Speaker 3 (05:21):
It'd be nice to think that, but I think it's
too soon to really call that. Having said that, although
my commentary since August has been a negative, quite shockingly
so to some people, I do have to keep emphasizing
there is still a recovery underway. We've got the absence
of those crunching interest rates, out there. We have the
surprisingly good returns in parts of the primary set sector,
(05:43):
more foreign students coming into the country, there is some
business investment infrastructure, so there is a recovery underway, but
it's not an especially strong one. It's the absence of
the strong upturn, which is catching out some businesses just
in the last gasp of their breath for this year.
Speaker 1 (06:00):
If we look at what the Reserve Bank came out with,
which was effectively a little bit of a split decision there,
they took some convincing the full board that a full
cut was needed of twenty five basis points. Apparently they
even talk about cutting fifty What do you take out
of that.
Speaker 3 (06:15):
Yeah, I wouldn't have voted for a cut. I would
have stuck there at three point five percent.
Speaker 1 (06:19):
Yeah.
Speaker 3 (06:19):
No, people don't want to hear that because I've just
said the economy this year weaker than people were thinking.
That sounds like less inflationary pressure. Not so quick, because
the other thing I've been saying since August last year,
on top of the economy's going to still be a
bit weak going forward, is there are still inflationary pressures
bubbling on underneath in the economy. Where are they coming from, well,
they're coming through the business sector. Generally, it's when you
(06:42):
go and buy your cheese also at the supermarket there
or you meet So the high commodity prices great news
for our farmer's, horticulturalists, et cetera. But it feeds through
into the supermarket, so we feel it there as a consumers.
But just generally, the costs are still rising out there.
And I've talked a lot about our price seat behavior
by businesses. And if we look, for instance, at the
(07:03):
A and Z's Monthly Business Outlook Survey, on average, since
nineteen ninety two, when inflation started settling around two two
and a half percent on average and net twenty six
percent of businesses have said I'm raising my prices within
the next year. That's still running at forty five percent.
So we've got a well above average proportion of businesses
saying I'm putting my prices up. And this is when
conditions are still weak. We've had recession or two recessions
(07:26):
in the economy in the past three years. You would
expect that number to be way way down, And of
course it comes from a net seventy three percent of
them are saying my cost arising, I expect them to
go higher in a year's time. So my concern is
that monetary policy aims at where things are going to
be in eighteen to twenty four months time. Well, I
expect the economy is going to be stronger. And when
I look at the A and Z survey and I
(07:48):
offset it against another survey from the New Zealand Institute
of Economic Research, you know they've done that survey since
the nineteen sixties. What it says to me is this,
once businesses see customers coming through the door and good
numbers like next year, to raise their prices to rebuild margins.
Speaker 1 (08:01):
And that will bring the inflation back.
Speaker 3 (08:03):
The inflation will come back. And so that's why I
think the Reserve Bank's mind now has shifted away from right,
we no longer need high interesstrates to crunch inflation. To
let's be careful, we don't continue the whipping around behavior
of the past, you know, one to two decades and
cut too far now and have to rapidly increase late
twenty six, twenty twenty twenty seven.
Speaker 1 (08:22):
Right, they really are taking quite a long view there.
Hard to get that long view though, I mean, you
saw Christian hawksbeare who's you know, acting governor at the moment,
came out kind of with a well, it's not just
what we see in front of us, it's what we
see either side of us. They have these alternative scenarios
which I kind of boiled down into my head to all,
we're facing some headwinds and it's all going to get
more expensive, or all, we're facing these headwinds and we're
(08:45):
just kind of going to give up. You know, the
whole economy is going to go into a coma globally
almost Am I way off there? Yeah?
Speaker 3 (08:50):
No, the economy is wild. Economy is still going to grow.
Like I was reading commentary this morning about the OECD
have slashed their forecast for world growth over the next
two years. Well that was the word that was used
in there. It was only a reduction of about zero
point two percent in their forecast this year and zero
point one percent next year. So people have detail as media,
what are you going to do? But we pay attention
(09:12):
to Oh there's a shocking headline, you know, and we
read it, but the actual change is relatively small. And
you know the Trump Terwi war that's underway, it's definite
negative for the world economy. There are two minds on
does this boost world inflation.
Speaker 1 (09:25):
Or lower it?
Speaker 3 (09:26):
Lower it? Even Treasure and Reserve Bank can't agree on
that one.
Speaker 1 (09:28):
For New Zealand, hence those different scenarios. Different scenario. We're
going to land here in the next sort of six
to twelve months.
Speaker 3 (09:34):
What are we saying, still slow recovery, which will strengthen
in twenty twenty six. But we shouldn't ignore the fact
that these are good prices for the farmers being received
out there. They will gain some greater confidence, do some spending.
And contrary to what I was thinking up until a
few months ago, where I said I think the recovery
is going to be broadly based in the economy, it
will now start more in the regions you see it
(09:56):
first and in Theicargo and Neden, christ Church gets it,
Taranaki plenty Waykatta get it. Auckland will be seeing it
early next year, Wellington maybe twenty twenty seven. Something will
flow through. It's just the normal lag in the process.
So broadly economic recovery is underway. But my message to
people when it comes to boring and interest rates, this
is almost as good as it's going to get almost
(10:17):
on the mortgage mortgage rates.
Speaker 1 (10:19):
That was exactly what I want to ask you next.
You've seeing banks now actually jousting again. I mean they're
you know, skuting about the fact that they're under sort
of four point nine percent. Yeah, eighteen months, Like that's
a wonderful sort of a number. Not bad, I suppose
in recent times we've seen a lot lower. What's going
on there are they're just trying to scoop up some
of those I think it was like thirty billion a
(10:40):
month that we're going to be rolling over their mortgages.
I think it was. Yeah, a lot of people.
Speaker 3 (10:44):
Yeah, because everyone's been fixing sort of one year for
a number of years now. Not many people locked in
for the five years at two point nine nine percent,
as I was jumping up and down saying I would
do for eleven month months starting exactly last week five
years ago. That's when we had the two point nine
to nine percent for five years first to appear in
twenty twenty, and it lasted for about eleven months. And
(11:04):
so you've just got to think there's actually a group
of people out there for whom their interstrates are now
jumping up from two point ninety nine to four ninety
nine or so. Poor beggars all that far. At least
they got that time. You know, at the lower rates there,
it'll be a shock. It'll be a shock of for
them out there. Don't anticipate that the interest rates go
much lower than they are at At the moment. The
financial markets are looking towards a future where global inflation
(11:26):
is slightly higher, US budget deficit blowout, et cetera. Places
upward pressure on medium to long term interest rates are everywhere,
and there is an economic recovery underway in New Zealand.
It's hard to talk about interstrates still needing to be
cut when there's an economic recovery underway, Like duh.
Speaker 1 (11:45):
Yeah, right, there's normal medicine reques. Does that mean? I
suppose if you're in a position where you're watching these
rates and you're thinking, oh, maybe I should break, It's like, well,
everybody's situation is their own. We should say this is
not financial advice, your own circummit senses dictate what you
should do, but potentially something to consider as hey, it's
it's going to be a longer interest rate picture.
Speaker 3 (12:03):
For if I had a mortgage that was maturing let's
say in three months time or six months time, I
wouldn't feel in need of Oh hang on, I'd better
get in right now, because inflation's going to jump up,
and in three or six months time the interest rates
are going to be half a percent high.
Speaker 1 (12:17):
No, I don't think that'd all see that.
Speaker 3 (12:19):
No, I think And even if people are going one
year fixed or two years or three years, it's going
to be you know, here or there six to one,
half a dozen of the other. Because I can't yet
see enough form in the interest rates outlook to say
this is when interest rates are going to start jumping up.
This is how much they're going to go by. I'd
want to get cover against that. Probably it's the other
side of the equation. It's the employment picture that's more
(12:41):
important at the moment, isn't it. Yeah, that's I think
one of the reasons the real estate market is still
being held back. So in my monthly survey of realistic
agents been doing it for five years now now, on average,
in five years, twenty one percent of the agents have
ticked the box saying buyers are worried about their jobs.
At the start of twenty twenty four, it was fourteen
one four percent. So we started last year with stronger
(13:04):
than average job security in the economy. It was one
wonderful well. Come June last year, fifty six percent of
agents saying people are worried about their jobs. And my
latest survey are just sent out. The results of that
fifty one percent of agents still say people are worried
about their jobs. And I think that's one reason the
housing market has failed to continue the recovery we saw
(13:24):
in the second half of last last year. And why
for the second time now since the start of twenty
twenty three, a recovery has fizzled out again. And I
think the labor market is one of the factors in play.
Speaker 1 (13:34):
And you you see it at all levels, I guess, because
if you're not if you're not selling, you're not buying,
you're not seeing people transitioning out of homes into retirement
villages and so on, you just everything kind of slows down.
And yep, you're still seeing listings and you're still seeing
stuff being built, right.
Speaker 3 (13:51):
Yeah, yeah, Well, the level of construction out there still
seems are pretty strong. In fact, as have been pointing
out to people, one of the structural shifts in you ye,
relevant to why house prices won't rise as much on
average in the future is that the level of construction
versus the population is now higher than we've had in
the past, so more supply coming forward and land being
(14:13):
made available, densification and tensification.
Speaker 1 (14:15):
Then the consent stuff as well. I mean they're talking
this private consenting outfit that's saying we'll get you a
consent of its simple in ten days. You've got the
government requiring councils to say how well you performing, and
apparently that's lifted it from like eighty percent in time
to like ninety more than ninetyer cent in time. So
there's like the system's working better, isn't it. But that
means more supply therefore perhaps lower prices.
Speaker 3 (14:38):
More supply coming forward, not so much lower prices, although
a net thirty eight percent of realistate agents at the
moment say prices are falling in there in the area.
So yeah, that's quite a strong result or almost back
to where we were in the middle of last year.
Speaker 1 (14:49):
I was looking. There was some There was a story
this week about how the listed property trusts out there
have seen their valuations basically kind of hit the bottom
and start to build again and there's more interest there.
Do you take any kind of indication from that end
of the market.
Speaker 3 (15:03):
Don't look at that at all myself. No, I look
more at what I'm picking up from my surveys of
the agents, the mortgage brokers, the property investors, et cetera.
Are out there, and that tells him what's happening right now.
I mean, the market will turn around, but I'm thinking
this is more a story for twenty twenty six than
it is for twenty twenty five. With the labor market
uncertainty at the moment, the strong supply that sits out there.
(15:25):
Net migration only plus twenty six thousand in the past year.
Two years ago almost it was one hundred and thirty
five thousand net. The average for ten years net migration
gained for New Zealand is fifty thousand. So let's say
we're running at about half average recent average at the moment.
So whereas a year ago or just over a year ago,
in my survey of property investors of landlords, I had
(15:46):
about a net twenty five percent of landlords saying it's
easy to get a good tenant, it's bonser, no worries.
Now I've got about a record net thirty three percent
or so, saying it is hard to get a good tenant.
So for the moment, the real estate market is subdued
buyers market.
Speaker 1 (16:00):
I'm many of the places in the country where that's
going to be particularly attractive or tricky, or it's just
a case of shopping around.
Speaker 3 (16:06):
Oh, you shop around, you find where you want to
live the broad area because it's near your church, it's
it's near your relatives, your friends, your sports fields, et cetera.
And you've got a greater chance of being able to
get something without having to accept. Okay, it's an operating
meth house at the moment, so I've got what are
you going to do. I've got to take it. You're
not really going to have to be making such die compromises.
(16:27):
There will be compromises, but not so much of that
sort of stuff.
Speaker 1 (16:31):
Sure, And I mean, are you getting that sense of
confidence because you speak to property investors in large numbers.
What are they telling you?
Speaker 3 (16:39):
What are they give the Well, then the investors are
interested in buying. But it's like when you see a
market relatively flat, you're thinking, am I missing something? If
they're not buying, maybe I shouldn't buy as well, because
we're social animals and we take our queue for what
to do from what other people are doing. This is
the test. There aren't many Warren Buffets, the sort of
(16:59):
person when everyone else is going that way, he goes no, no, no,
I go this way. This is part of that challenge
that for the moment, prices aren't rising, and so you're thinking, well,
if I buy now, what if the price goes down
three or four percent? Will I feel like an an idiot?
And we call that foop fear of overpaying. And so
I've got a measure of that from my real estate
agent survey as well. And now and then I'll do
(17:20):
a graph of foop has gone up so that more recently,
over the past four months, more buyers are worried.
Speaker 1 (17:25):
Am I buying?
Speaker 3 (17:26):
Then the price goes down? Whereas FOMO only five percent
of agents say buyers are feeling fomo. It's a buyers market,
is all I can say. Wow, despite the foop, despite
the foop, Yeah, that's right. Hey, no one's going to
pick the bottom. You can't pick the top. And you've
got to be thinking, if I'm buying a property, I'm
probably going to be in it or owning it as
a rental for a great number of years. Seriously, who
gives a great worry at all that what happens in
(17:47):
the next twelve to twelve months.
Speaker 1 (17:49):
Yeah, yeah, that twelve months won't matter twenty years from.
Speaker 3 (17:51):
Now, surely or not. Trouble is we all live in
the short term.
Speaker 1 (17:54):
True, Just thinking in the short term and thinking back
to the budget, there was some supposed long term, long
term thinking in the budget there around things like key
we saver and so on. Was there anything in there
that jumped out and made you think, kriky, we're on
the right track here, right track and terms of well,
just in terms of the long term plan for how
we get people saving more in a position to be
(18:14):
able to either invest in property, invest in whatever they're doing.
Speaker 3 (18:17):
We are we are we answering that question, Well, the
budget wasn't focused on that. The budget was all about
putting in place a better fiscal track to get the
Crown accounts for New Zealand ready for when the next
shock comes along. I mean, you can virtually guarantee within
the next ten years there's going to be another major
shock at the New Zealand economy. We've just got no
idea when it's what it's going to be, how bad
(18:40):
it's going to be. But the accounts need to be
ready for that, especially given our high dependence in New
Zealand on people saving overseas. We use there, we use
their money, and so yeah, improving savings is definitely a
positive i'd suggest for New Zealand, but the budget wasn't
aim data doing that, and unfortunately for Key we Savor
from my point of view, right early on, when businesses
(19:01):
were allowed to opt out of making a contribution by saying, oh,
we're going to put it into the person's salary instead
of contributing three percent ourselves, well, i'd suggest most people
who had it put into their fully costed up salary
in that year might have noticed. I didn't get much
of a salary increase in the next three or four
years after that one, and I think for me, that's
(19:21):
a bastardization of Key we Savor away from what it
could have been.
Speaker 1 (19:25):
So and it's too late to try and fish that. Obviously,
the costs are quite high there. You've just got to
try and work on it. Yeah, right, it's nothing else
in there. Obviously, the tweaks that they made to things
like contributions. It's all sort of water under the bridge.
Speaker 3 (19:37):
Yeah, it's neither here nor there. I think in terms of,
you know, the outlook, do I think all suddenly there's
a big pool of savings and this is going to
provide capital for growing New Zealand businesses.
Speaker 1 (19:45):
No, no, no, no no.
Speaker 3 (19:45):
This was hardly even at the margin sort of stuff there.
It really doesn't classifies anything major. Even when we look
at something like the twenty percent first year depreciation allowance,
businesses can claim for their for their investment, and it
sounds good and I'd say, yes, it is a good thing.
The issue is a lot of businesses were already saying
I'm going to invest and ah, now I can claim
more this year, I'll whack. Oh it's going to be
(20:07):
of cash flow assistance and it might stimulate some more
business investment in New Zealand. But it doesn't really change
the outlook. I'm not actually aware of anyone who's actually
changed their outlook for our economy on the basis of
the budget.
Speaker 1 (20:19):
I certainly haven't so yet. Apparently it's going to increase
our gdp BI. I can't remember their figure by so much,
but enough to sort of nudge it up by more
than half a percent.
Speaker 3 (20:28):
I think it's going to be one percent over twenty years.
So full credit to Treasury for actually writing that. You're saying, yes,
there's a positive impact, but by the way, it's the
next two decades, and they're probably right, it is probably
going to be something like that, But it doesn't change
the key dynamic. Let's say, for businesses at the moment
of their margins are severely compressed, their costs are still rising,
they're wondering, really, when do more customers come forward? That
(20:52):
stuff is far more important than these tweaks from the budget.
Speaker 1 (20:57):
I wanted to try and get to a bit of
long term stuff now, and if we can just try
and sort of think long term, people talk about I
think the phrase the great wealth transfer is one that's
been thrown around, this idea that you've got a range
of people probably hitting retirement now and getting on and
they're getting at the point where they're going to potentially
hand that wealth to another generation and so on. I mean,
(21:19):
people talk about that and how people have built that
up and might leave it to their kids and grandkids.
Are the implications of that for the property market.
Speaker 3 (21:27):
We lack research on what is really going to happen,
And even if one looks at research coming from countries
which have already gone through aging processes like Japan, Germany
and a few others, it may not be entirely relevant
to the New Zealand situation. And maybe especially when we've
looked at one of the developments in the past eighteen months,
is that with soaring local authority rates and insurance premiums
(21:49):
and electricity prices, butter and meat, any spreadsheet a person
has run for this is what I can afford to
spend in my retirement, It's all out the window. Any
savings or investment calculations you made from you know, when
campaigns first were run by the government on save for
retirement late eighties, early nineties, it's all out the window.
And so I can't help but thinking that some people
who have reached the conclusion I'm actually going to have
(22:11):
to spend more of what this inheritance passing on is
going to be? Why should I sacrifice even more for
these ungrateful kids or whoever a situation? And so I
think for the New Zealand context, it's really hard to
figure out any implication for what's going to happen. However,
when I was running through a little list earlier on
of reasons why the housing market is subdued at the moment,
(22:32):
and I did mention a lot of construction, a lot
of supply out there, the employment market worries low fomo,
I did make a little bit of a reference earlier
on to investors doing selling that extra supply is on
the market. Other investors come in bring it up to
healthy home standards, or young buyers come in and watch
(22:52):
some videos and learn how to use a screwdriver and
a hammer and do it up themselves. There's an opportunity
to add value to one's proper by improving undertaking long
overdue maintenance on some of those properties. So I think
that's one elements in there from the retiring genet generation
or already in retirement.
Speaker 1 (23:08):
But is that like a wee blip or is that
like the start of quite a strong trend if you like,
Because there are a lot of people out there that
would be facing those circumstances.
Speaker 3 (23:18):
It's probably a move up to a higher level of
investors selling on average than was the case. So if
it was chugging along like this before, it's now I
think going to chug along at a higher level like
that for a number of years, so higher average listings
of property than would have been the case. So I
don't think it's a blip, but it's going to be sustained.
But that doesn't mean it sustains its negative impact on
(23:39):
the market for a great number of years. It's just
a bit more supply out there for buyers to choose from.
And you have to think to yourself, you know, from
having all of us watch this housing market be so
difficult for young buyers in particular for so many years.
Thank goodness, this is a really good story, quite frankly.
But yeah, just to finish off with the passing on
to the next generation, I don't know how that spins
(23:59):
out in terms of how does it affect the saving
is an investment desire of the generation that think it's
that they're going to get it, And you've got to
watch your assumptions because what I'm increasingly hearing from people
who are thinking about when they pass and then passing
on the wealth, they're going to skip a generation, or
they're going to skip two generations and give it to
not even the grand kids, the great grand kids, or
(24:20):
something like this, people need to watch their assumption about
who gets the dosh.
Speaker 1 (24:23):
You've got to wonder as well whether it's going to
change people's approaches, like is it just going to be
a straight roll into the same kinds of investments property
investments as before. Are people going to take different approaches
as well?
Speaker 3 (24:33):
Yeah, exactly. I think there's going to be more diversification
in people's investment portfolios when they needs to save for retirement.
At central messages were getting hammered by the government from
the early nineteen nineties. It was soon after the shear
market had crashed in nineteen eighty seven, and people, i
think naturally moved towards other assets like residential property, assisted
by interst rates falling sharply. In the early nineteen nineties,
(24:56):
inflation went from averaging eleven percent to about two and
a half percent. Straits are foul away, we had migration
numbers getting stronger. It all came together to bring a
lot more people into the residential property investment market from
the mid part of the nineteen nineties than we'd seen before.
I think now that extra layer of people is slowly
(25:17):
going to be dissipated away. We're still going to be
left with a lot of people investing in residential property.
But I think more people now are going to be
looking at other areas in which to invest their money,
be it either for retirement or for something special. In
ten or twenty years time, I think there'll be more
diversification away from property. But still one thing of the
population is still going to be renting, So the need
for the rental population, the rental stop to be out there,
(25:39):
is still going to be strong.
Speaker 1 (25:40):
Tony Alexander, thank you so much, and thank you for watching.
For listening, whether you're on iHeart or straight off the
app or Spotify or YouTube, make sure that you hit
that like and subscribe Quimitu. That's us for this week.
Junokoto. Welcome to shared lunch. I'm Garth Bray. Well winter
is here not normally a boomer of a time for
our property market, and the Reserve Bank is sounding a
little loop warm about easing rates. Further so, what lies
ahead for us? Time to check in with that sage
of the savvy property investor, Tony Alexander see what he thinks.
But before that, it's some important information you should always
(00:26):
consider before investing.
Speaker 2 (00:28):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 1 (00:42):
Tony, A rare pleasure to have you here face to
face in Auckland. Love to have you with us. Yep.
I'll get to the Reserve Bank in a second. But
the centric starter that we've seen out very recently, the
credit reporting stuff that shows business and consumer credit up.
I mean it's not the lending is not where it
was in twe but is that the first sign that
things are getting better or is it still not looking great?
Speaker 3 (01:04):
Oh? We're economists don't generally look at the lending data
for a sign of what's happening in the economy. We
tend more to look at leading indicators, what's happening with
consumer sentiment, business sentiment, these sort of things, investment, intensions,
employment and tensions. So definitely interesting there. But for instance,
if you look at the reserve banks lending numbers, the
volume of lending to the farming sector is down about
(01:27):
one percent or so on a year earlier. So do
we look at that and go, farming's falling away. It's
all getting really really bad, while not with commodity prices
up about seventeen percent on a year earlier.
Speaker 1 (01:36):
So they're probably just paying off debt, aren't they. Because
things are so good that it's actually a healthy sign.
Speaker 3 (01:41):
That's relevant because if we talk about the good returns
being made by the farmers, oh, the region's going to boom.
Rural towns are going to absolutely boom. Right, that's where
I'm going to do my property investment. Yeah, we'll just
remember the costs for operating a farm have gone through
the roof in recent years. And yeah, they've been getting
a voice in their ear to pay down debt for
a long time. So the actual region stimulus. It's going
to be there, but it's not really going to be
(02:02):
what it's been in the past coming out of recessions.
Speaker 1 (02:04):
Just on that though, I looked at that Centrix data
and there was like a heat map of how badly
in areas, how badly behind people are. She was lush
green all up the South Island, all in single digits.
You get up into pretty much the whole of the
North Island was a bit of an orange, and you
get to Bay of Plenty, you get to the coast Titaffity,
it was red and we're talking like seventeen eighteen percent,
(02:26):
you know, in an areas and sign that's not a
healthy sign. That's a two track economy, there isn't it.
Speaker 3 (02:31):
Well, yeah, for the moment, I think it does look
like that, And in a way it's sort of a
payback and a broad sense from earlier on when we
saw from a housing market perspective, things were growing really
strongly in the North Island but not in the South Island.
I used to talk a lot about it that this
boom and house prices. There was some in the South Island,
but it wasn't as much as in the North Island,
(02:51):
and so if we extrapolate that to businesses in general,
probably you've got more businesses getting over optimistic in the
North Island than the South Island during the boom, and
so when you get the type monetary policy occur, there's
more weeding out to do in the business sector, maybe
residential property investment market in the North Island than the
South Island. So that's sort of what I would put
(03:12):
it down to. I wouldn't over extrapolate that towards right
New Zealand's future for the next hundred years. It's back
to the South Island. This population imbalanced twenty five percent
in South Island or so seventy five percent North. It's
going to reverse yet, No, it's just a bit of
a cyclical thing from that earlier on boom which was
more in the North.
Speaker 1 (03:30):
It just must be anecdotes that I keep running into
people that are moving to christ Church the end to
try and ditch the Auckland property prices.
Speaker 3 (03:35):
Well, that's definitely happening and it's going to keep happening
as well.
Speaker 1 (03:38):
Yeah, yeah, I mean liquidations in some of that data
were quite high. Business liquidations. We're talking like thirty percent
I think was it up on year on year. That's
not good.
Speaker 3 (03:46):
Yeah, yeah, definitely not good. But this is what I
warned about from twenty twenty two. In fact, as early
as the first half of twenty twenty one, I was
warning residential builders just watch out. There's a boom underway.
Lots of inexperienced, undercapitalized people are entering the residential construction sector,
as widely defined, and there's going to be a weeding
out period somewhere down the track. And then I morphed
(04:08):
that into talking about over twenty twenty three of this
weeding out is going to be across all sectors of
the economy in twenty twenty four. And so that's what
we saw with liquidations up et cetera last year. And
then of course I was warning strongly from August last
year when we saw the interest rates were coming down.
A journalist wrote, We're going to be a rockstar economy again,
and I thought, what a load of absolute rubbish. There
(04:29):
are going to be businesses that are going to be
caught out and some of the weakness we see in
the economy at the moment. It's the reality check as
I think businesses are realizing, oh, who was right? This
isn't a boom. We survived to twenty five, it's not enough.
And some businesses, either from their own volition or the
ird or the bank the creditors are realizing we can't
make it.
Speaker 1 (04:49):
If we don't have a boom.
Speaker 3 (04:51):
Then, given the cost we've got going up, the massive
margin compression, we've got to close down. And so that
weeding out process is still rolling through twenty twenty five. Actually,
as the CENTRIC data showed in the construction sector, where
there was a much sharper increase in number of liquidations
sort of trending upwards in the past three years compared
with other sectors like retail, hospitality.
Speaker 1 (05:11):
Because broadly, I think this month that actually turned, or
last month it's turned, and it almost looks like the
worm is turning down. The liquidations might just be starting
to trend down. You don't think it's over.
Speaker 3 (05:21):
It'd be nice to think that, but I think it's
too soon to really call that. Having said that, although
my commentary since August has been a negative, quite shockingly
so to some people, I do have to keep emphasizing
there is still a recovery underway. We've got the absence
of those crunching interest rates, out there. We have the
surprisingly good returns in parts of the primary set sector,
(05:43):
more foreign students coming into the country, there is some
business investment infrastructure, so there is a recovery underway, but
it's not an especially strong one. It's the absence of
the strong upturn, which is catching out some businesses just
in the last gasp of their breath for this year.
Speaker 1 (06:00):
If we look at what the Reserve Bank came out with,
which was effectively a little bit of a split decision there,
they took some convincing the full board that a full
cut was needed of twenty five basis points. Apparently they
even talk about cutting fifty What do you take out
of that.
Speaker 3 (06:15):
Yeah, I wouldn't have voted for a cut. I would
have stuck there at three point five percent.
Speaker 1 (06:19):
Yeah.
Speaker 3 (06:19):
No, people don't want to hear that because I've just
said the economy this year weaker than people were thinking.
That sounds like less inflationary pressure. Not so quick, because
the other thing I've been saying since August last year,
on top of the economy's going to still be a
bit weak going forward, is there are still inflationary pressures
bubbling on underneath in the economy. Where are they coming from, well,
they're coming through the business sector. Generally, it's when you
(06:42):
go and buy your cheese also at the supermarket there
or you meet So the high commodity prices great news
for our farmer's, horticulturalists, et cetera. But it feeds through
into the supermarket, so we feel it there as a consumers.
But just generally, the costs are still rising out there.
And I've talked a lot about our price seat behavior
by businesses. And if we look, for instance, at the
(07:03):
A and Z's Monthly Business Outlook Survey, on average, since
nineteen ninety two, when inflation started settling around two two
and a half percent on average and net twenty six
percent of businesses have said I'm raising my prices within
the next year. That's still running at forty five percent.
So we've got a well above average proportion of businesses
saying I'm putting my prices up. And this is when
conditions are still weak. We've had recession or two recessions
(07:26):
in the economy in the past three years. You would
expect that number to be way way down, And of
course it comes from a net seventy three percent of
them are saying my cost arising, I expect them to
go higher in a year's time. So my concern is
that monetary policy aims at where things are going to
be in eighteen to twenty four months time. Well, I
expect the economy is going to be stronger. And when
I look at the A and Z survey and I
(07:48):
offset it against another survey from the New Zealand Institute
of Economic Research, you know they've done that survey since
the nineteen sixties. What it says to me is this,
once businesses see customers coming through the door and good
numbers like next year, to raise their prices to rebuild margins.
Speaker 1 (08:01):
And that will bring the inflation back.
Speaker 3 (08:03):
The inflation will come back. And so that's why I
think the Reserve Bank's mind now has shifted away from right,
we no longer need high interesstrates to crunch inflation. To
let's be careful, we don't continue the whipping around behavior
of the past, you know, one to two decades and
cut too far now and have to rapidly increase late
twenty six, twenty twenty twenty seven.
Speaker 1 (08:22):
Right, they really are taking quite a long view there.
Hard to get that long view though, I mean, you
saw Christian hawksbeare who's you know, acting governor at the moment,
came out kind of with a well, it's not just
what we see in front of us, it's what we
see either side of us. They have these alternative scenarios
which I kind of boiled down into my head to all,
we're facing some headwinds and it's all going to get
more expensive, or all, we're facing these headwinds and we're
(08:45):
just kind of going to give up. You know, the
whole economy is going to go into a coma globally
almost Am I way off there? Yeah?
Speaker 3 (08:50):
No, the economy is wild. Economy is still going to grow.
Like I was reading commentary this morning about the OECD
have slashed their forecast for world growth over the next
two years. Well that was the word that was used
in there. It was only a reduction of about zero
point two percent in their forecast this year and zero
point one percent next year. So people have detail as media,
what are you going to do? But we pay attention
(09:12):
to Oh there's a shocking headline, you know, and we
read it, but the actual change is relatively small. And
you know the Trump Terwi war that's underway, it's definite
negative for the world economy. There are two minds on
does this boost world inflation.
Speaker 1 (09:25):
Or lower it?
Speaker 3 (09:26):
Lower it? Even Treasure and Reserve Bank can't agree on
that one.
Speaker 1 (09:28):
For New Zealand, hence those different scenarios. Different scenario. We're
going to land here in the next sort of six
to twelve months.
Speaker 3 (09:34):
What are we saying, still slow recovery, which will strengthen
in twenty twenty six. But we shouldn't ignore the fact
that these are good prices for the farmers being received
out there. They will gain some greater confidence, do some spending.
And contrary to what I was thinking up until a
few months ago, where I said I think the recovery
is going to be broadly based in the economy, it
will now start more in the regions you see it
(09:56):
first and in Theicargo and Neden, christ Church gets it,
Taranaki plenty Waykatta get it. Auckland will be seeing it
early next year, Wellington maybe twenty twenty seven. Something will
flow through. It's just the normal lag in the process.
So broadly economic recovery is underway. But my message to
people when it comes to boring and interest rates, this
is almost as good as it's going to get almost
(10:17):
on the mortgage mortgage rates.
Speaker 1 (10:19):
That was exactly what I want to ask you next.
You've seeing banks now actually jousting again. I mean they're
you know, skuting about the fact that they're under sort
of four point nine percent. Yeah, eighteen months, Like that's
a wonderful sort of a number. Not bad, I suppose
in recent times we've seen a lot lower. What's going
on there are they're just trying to scoop up some
of those I think it was like thirty billion a
(10:40):
month that we're going to be rolling over their mortgages.
I think it was. Yeah, a lot of people.
Speaker 3 (10:44):
Yeah, because everyone's been fixing sort of one year for
a number of years now. Not many people locked in
for the five years at two point nine nine percent,
as I was jumping up and down saying I would
do for eleven month months starting exactly last week five
years ago. That's when we had the two point nine
to nine percent for five years first to appear in
twenty twenty, and it lasted for about eleven months. And
(11:04):
so you've just got to think there's actually a group
of people out there for whom their interstrates are now
jumping up from two point ninety nine to four ninety
nine or so. Poor beggars all that far. At least
they got that time. You know, at the lower rates there,
it'll be a shock. It'll be a shock of for
them out there. Don't anticipate that the interest rates go
much lower than they are at At the moment. The
financial markets are looking towards a future where global inflation
(11:26):
is slightly higher, US budget deficit blowout, et cetera. Places
upward pressure on medium to long term interest rates are everywhere,
and there is an economic recovery underway in New Zealand.
It's hard to talk about interstrates still needing to be
cut when there's an economic recovery underway, Like duh.
Speaker 1 (11:45):
Yeah, right, there's normal medicine reques. Does that mean? I
suppose if you're in a position where you're watching these
rates and you're thinking, oh, maybe I should break, It's like, well,
everybody's situation is their own. We should say this is
not financial advice, your own circummit senses dictate what you
should do, but potentially something to consider as hey, it's
it's going to be a longer interest rate picture.
Speaker 3 (12:03):
For if I had a mortgage that was maturing let's
say in three months time or six months time, I
wouldn't feel in need of Oh hang on, I'd better
get in right now, because inflation's going to jump up,
and in three or six months time the interest rates
are going to be half a percent high.
Speaker 1 (12:17):
No, I don't think that'd all see that.
Speaker 3 (12:19):
No, I think And even if people are going one
year fixed or two years or three years, it's going
to be you know, here or there six to one,
half a dozen of the other. Because I can't yet
see enough form in the interest rates outlook to say
this is when interest rates are going to start jumping up.
This is how much they're going to go by. I'd
want to get cover against that. Probably it's the other
side of the equation. It's the employment picture that's more
(12:41):
important at the moment, isn't it. Yeah, that's I think
one of the reasons the real estate market is still
being held back. So in my monthly survey of realistic
agents been doing it for five years now now, on average,
in five years, twenty one percent of the agents have
ticked the box saying buyers are worried about their jobs.
At the start of twenty twenty four, it was fourteen
one four percent. So we started last year with stronger
(13:04):
than average job security in the economy. It was one
wonderful well. Come June last year, fifty six percent of
agents saying people are worried about their jobs. And my
latest survey are just sent out. The results of that
fifty one percent of agents still say people are worried
about their jobs. And I think that's one reason the
housing market has failed to continue the recovery we saw
(13:24):
in the second half of last last year. And why
for the second time now since the start of twenty
twenty three, a recovery has fizzled out again. And I
think the labor market is one of the factors in play.
Speaker 1 (13:34):
And you you see it at all levels, I guess, because
if you're not if you're not selling, you're not buying,
you're not seeing people transitioning out of homes into retirement
villages and so on, you just everything kind of slows down.
And yep, you're still seeing listings and you're still seeing
stuff being built, right.
Speaker 3 (13:51):
Yeah, yeah, Well, the level of construction out there still
seems are pretty strong. In fact, as have been pointing
out to people, one of the structural shifts in you ye,
relevant to why house prices won't rise as much on
average in the future is that the level of construction
versus the population is now higher than we've had in
the past, so more supply coming forward and land being
(14:13):
made available, densification and tensification.
Speaker 1 (14:15):
Then the consent stuff as well. I mean they're talking
this private consenting outfit that's saying we'll get you a
consent of its simple in ten days. You've got the
government requiring councils to say how well you performing, and
apparently that's lifted it from like eighty percent in time
to like ninety more than ninetyer cent in time. So
there's like the system's working better, isn't it. But that
means more supply therefore perhaps lower prices.
Speaker 3 (14:38):
More supply coming forward, not so much lower prices, although
a net thirty eight percent of realistate agents at the
moment say prices are falling in there in the area.
So yeah, that's quite a strong result or almost back
to where we were in the middle of last year.
Speaker 1 (14:49):
I was looking. There was some There was a story
this week about how the listed property trusts out there
have seen their valuations basically kind of hit the bottom
and start to build again and there's more interest there.
Do you take any kind of indication from that end
of the market.
Speaker 3 (15:03):
Don't look at that at all myself. No, I look
more at what I'm picking up from my surveys of
the agents, the mortgage brokers, the property investors, et cetera.
Are out there, and that tells him what's happening right now.
I mean, the market will turn around, but I'm thinking
this is more a story for twenty twenty six than
it is for twenty twenty five. With the labor market
uncertainty at the moment, the strong supply that sits out there.
(15:25):
Net migration only plus twenty six thousand in the past year.
Two years ago almost it was one hundred and thirty
five thousand net. The average for ten years net migration
gained for New Zealand is fifty thousand. So let's say
we're running at about half average recent average at the moment.
So whereas a year ago or just over a year ago,
in my survey of property investors of landlords, I had
(15:46):
about a net twenty five percent of landlords saying it's
easy to get a good tenant, it's bonser, no worries.
Now I've got about a record net thirty three percent
or so, saying it is hard to get a good tenant.
So for the moment, the real estate market is subdued
buyers market.
Speaker 1 (16:00):
I'm many of the places in the country where that's
going to be particularly attractive or tricky, or it's just
a case of shopping around.
Speaker 3 (16:06):
Oh, you shop around, you find where you want to
live the broad area because it's near your church, it's
it's near your relatives, your friends, your sports fields, et cetera.
And you've got a greater chance of being able to
get something without having to accept. Okay, it's an operating
meth house at the moment, so I've got what are
you going to do. I've got to take it. You're
not really going to have to be making such die compromises.
(16:27):
There will be compromises, but not so much of that
sort of stuff.
Speaker 1 (16:31):
Sure, And I mean, are you getting that sense of
confidence because you speak to property investors in large numbers.
What are they telling you?
Speaker 3 (16:39):
What are they give the Well, then the investors are
interested in buying. But it's like when you see a
market relatively flat, you're thinking, am I missing something? If
they're not buying, maybe I shouldn't buy as well, because
we're social animals and we take our queue for what
to do from what other people are doing. This is
the test. There aren't many Warren Buffets, the sort of
(16:59):
person when everyone else is going that way, he goes no, no, no,
I go this way. This is part of that challenge
that for the moment, prices aren't rising, and so you're thinking, well,
if I buy now, what if the price goes down
three or four percent? Will I feel like an an idiot?
And we call that foop fear of overpaying. And so
I've got a measure of that from my real estate
agent survey as well. And now and then I'll do
(17:20):
a graph of foop has gone up so that more recently,
over the past four months, more buyers are worried.
Speaker 1 (17:25):
Am I buying?
Speaker 3 (17:26):
Then the price goes down? Whereas FOMO only five percent
of agents say buyers are feeling fomo. It's a buyers market,
is all I can say. Wow, despite the foop, despite
the foop, Yeah, that's right. Hey, no one's going to
pick the bottom. You can't pick the top. And you've
got to be thinking, if I'm buying a property, I'm
probably going to be in it or owning it as
a rental for a great number of years. Seriously, who
gives a great worry at all that what happens in
(17:47):
the next twelve to twelve months.
Speaker 1 (17:49):
Yeah, yeah, that twelve months won't matter twenty years from.
Speaker 3 (17:51):
Now, surely or not. Trouble is we all live in
the short term.
Speaker 1 (17:54):
True, Just thinking in the short term and thinking back
to the budget, there was some supposed long term, long
term thinking in the budget there around things like key
we saver and so on. Was there anything in there
that jumped out and made you think, kriky, we're on
the right track here, right track and terms of well,
just in terms of the long term plan for how
we get people saving more in a position to be
(18:14):
able to either invest in property, invest in whatever they're doing.
Speaker 3 (18:17):
We are we are we answering that question, Well, the
budget wasn't focused on that. The budget was all about
putting in place a better fiscal track to get the
Crown accounts for New Zealand ready for when the next
shock comes along. I mean, you can virtually guarantee within
the next ten years there's going to be another major
shock at the New Zealand economy. We've just got no
idea when it's what it's going to be, how bad
(18:40):
it's going to be. But the accounts need to be
ready for that, especially given our high dependence in New
Zealand on people saving overseas. We use there, we use
their money, and so yeah, improving savings is definitely a
positive i'd suggest for New Zealand, but the budget wasn't
aim data doing that, and unfortunately for Key we Savor
from my point of view, right early on, when businesses
(19:01):
were allowed to opt out of making a contribution by saying, oh,
we're going to put it into the person's salary instead
of contributing three percent ourselves, well, i'd suggest most people
who had it put into their fully costed up salary
in that year might have noticed. I didn't get much
of a salary increase in the next three or four
years after that one, and I think for me, that's
(19:21):
a bastardization of Key we Savor away from what it
could have been.
Speaker 1 (19:25):
So and it's too late to try and fish that. Obviously,
the costs are quite high there. You've just got to
try and work on it. Yeah, right, it's nothing else
in there. Obviously, the tweaks that they made to things
like contributions. It's all sort of water under the bridge.
Speaker 3 (19:37):
Yeah, it's neither here nor there. I think in terms of,
you know, the outlook, do I think all suddenly there's
a big pool of savings and this is going to
provide capital for growing New Zealand businesses.
Speaker 1 (19:45):
No, no, no, no no.
Speaker 3 (19:45):
This was hardly even at the margin sort of stuff there.
It really doesn't classifies anything major. Even when we look
at something like the twenty percent first year depreciation allowance,
businesses can claim for their for their investment, and it
sounds good and I'd say, yes, it is a good thing.
The issue is a lot of businesses were already saying
I'm going to invest and ah, now I can claim
more this year, I'll whack. Oh it's going to be
(20:07):
of cash flow assistance and it might stimulate some more
business investment in New Zealand. But it doesn't really change
the outlook. I'm not actually aware of anyone who's actually
changed their outlook for our economy on the basis of
the budget.
Speaker 1 (20:19):
I certainly haven't so yet. Apparently it's going to increase
our gdp BI. I can't remember their figure by so much,
but enough to sort of nudge it up by more
than half a percent.
Speaker 3 (20:28):
I think it's going to be one percent over twenty years.
So full credit to Treasury for actually writing that. You're saying, yes,
there's a positive impact, but by the way, it's the
next two decades, and they're probably right, it is probably
going to be something like that, But it doesn't change
the key dynamic. Let's say, for businesses at the moment
of their margins are severely compressed, their costs are still rising,
they're wondering, really, when do more customers come forward? That
(20:52):
stuff is far more important than these tweaks from the budget.
Speaker 1 (20:57):
I wanted to try and get to a bit of
long term stuff now, and if we can just try
and sort of think long term, people talk about I
think the phrase the great wealth transfer is one that's
been thrown around, this idea that you've got a range
of people probably hitting retirement now and getting on and
they're getting at the point where they're going to potentially
hand that wealth to another generation and so on. I mean,
(21:19):
people talk about that and how people have built that
up and might leave it to their kids and grandkids.
Are the implications of that for the property market.
Speaker 3 (21:27):
We lack research on what is really going to happen,
And even if one looks at research coming from countries
which have already gone through aging processes like Japan, Germany
and a few others, it may not be entirely relevant
to the New Zealand situation. And maybe especially when we've
looked at one of the developments in the past eighteen months,
is that with soaring local authority rates and insurance premiums
(21:49):
and electricity prices, butter and meat, any spreadsheet a person
has run for this is what I can afford to
spend in my retirement, It's all out the window. Any
savings or investment calculations you made from you know, when
campaigns first were run by the government on save for
retirement late eighties, early nineties, it's all out the window.
And so I can't help but thinking that some people
who have reached the conclusion I'm actually going to have
(22:11):
to spend more of what this inheritance passing on is
going to be? Why should I sacrifice even more for
these ungrateful kids or whoever a situation? And so I
think for the New Zealand context, it's really hard to
figure out any implication for what's going to happen. However,
when I was running through a little list earlier on
of reasons why the housing market is subdued at the moment,
(22:32):
and I did mention a lot of construction, a lot
of supply out there, the employment market worries low fomo,
I did make a little bit of a reference earlier
on to investors doing selling that extra supply is on
the market. Other investors come in bring it up to
healthy home standards, or young buyers come in and watch
(22:52):
some videos and learn how to use a screwdriver and
a hammer and do it up themselves. There's an opportunity
to add value to one's proper by improving undertaking long
overdue maintenance on some of those properties. So I think
that's one elements in there from the retiring genet generation
or already in retirement.
Speaker 1 (23:08):
But is that like a wee blip or is that
like the start of quite a strong trend if you like,
Because there are a lot of people out there that
would be facing those circumstances.
Speaker 3 (23:18):
It's probably a move up to a higher level of
investors selling on average than was the case. So if
it was chugging along like this before, it's now I
think going to chug along at a higher level like
that for a number of years, so higher average listings
of property than would have been the case. So I
don't think it's a blip, but it's going to be sustained.
But that doesn't mean it sustains its negative impact on
(23:39):
the market for a great number of years. It's just
a bit more supply out there for buyers to choose from.
And you have to think to yourself, you know, from
having all of us watch this housing market be so
difficult for young buyers in particular for so many years.
Thank goodness, this is a really good story, quite frankly.
But yeah, just to finish off with the passing on
to the next generation, I don't know how that spins
(23:59):
out in terms of how does it affect the saving
is an investment desire of the generation that think it's
that they're going to get it, And you've got to
watch your assumptions because what I'm increasingly hearing from people
who are thinking about when they pass and then passing
on the wealth, they're going to skip a generation, or
they're going to skip two generations and give it to
not even the grand kids, the great grand kids, or
(24:20):
something like this, people need to watch their assumption about
who gets the dosh.
Speaker 1 (24:23):
You've got to wonder as well whether it's going to
change people's approaches, like is it just going to be
a straight roll into the same kinds of investments property
investments as before. Are people going to take different approaches
as well?
Speaker 3 (24:33):
Yeah, exactly. I think there's going to be more diversification
in people's investment portfolios when they needs to save for retirement.
At central messages were getting hammered by the government from
the early nineteen nineties. It was soon after the shear
market had crashed in nineteen eighty seven, and people, i
think naturally moved towards other assets like residential property, assisted
by interst rates falling sharply. In the early nineteen nineties,
(24:56):
inflation went from averaging eleven percent to about two and
a half percent. Straits are foul away, we had migration
numbers getting stronger. It all came together to bring a
lot more people into the residential property investment market from
the mid part of the nineteen nineties than we'd seen before.
I think now that extra layer of people is slowly
(25:17):
going to be dissipated away. We're still going to be
left with a lot of people investing in residential property.
But I think more people now are going to be
looking at other areas in which to invest their money,
be it either for retirement or for something special. In
ten or twenty years time, I think there'll be more
diversification away from property. But still one thing of the
population is still going to be renting, So the need
for the rental population, the rental stop to be out there,
(25:39):
is still going to be strong.
Speaker 1 (25:40):
Tony Alexander, thank you so much, and thank you for watching.
For listening, whether you're on iHeart or straight off the
app or Spotify or YouTube, make sure that you hit
that like and subscribe Quimitu. That's us for this week.
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