12 October 2009

Recent statistics from QV Valuations (a leading property valuation agency) show increased activity in the New Zealand property market for the year to September 2009, with house prices recovering to levels close to that that of a year ago.

This data supports views that the New Zealand economy has emerged from its longest recession in more than 30 years, Reuters reported today.

In many areas of New Zealand, there has been an increase in sales with more listings.  According to QV Valuation Manager Glenda Whitehead, “this increase in activity is normal for spring but there is still a feeling that activity levels are below normal, with somewhat fewer listings to date this spring than was expected.”

It seems that in general there are more buyers than sellers with increased competition among keen buyers edging prices upwards. The average sale price across New Zealand increased further to $387,567 NZD in September from $385,426 in August.

Nationwide values are now up 2.7 percent up from their low back in April 2009, however values are still well below New Zealand’s property market peak of late 2007.

Increasing values in recent months mean that most of New Zealand’s main centres now have values above the same time last year.

The monthly residential price report from QV is based on sale prices of properties over the past three months compared with sales over the corresponding three-month period a year earlier. The data is not seasonally adjusted.

Ref: QV Valuations, NZ Herald

 19 September 2009

The views of Westpac Bank’s chief economist, Brendan O’Donovan, were recently aired at the Transtasman Credit Summit in Wellington.  His optimistic perspective was that a migration-driven housing construction boom would fuel New Zealand’s economic recovery, with Auckland leading the way.

O’Donovan’s point of view is unlikely to be welcomed by New Zealand’s Reserve Bank and Treasury, who are hoping for an export-led recovery complemented by housing market restraint.

Internationally, O’Donovan noted leading indicators were pointing to a strong recovery in global manufacturing activity in the next 9 months with uncertainty after that time.

However, he was more positive about New Zealand’s recovery where the “big story” was the ongoing migration turnaround.  Last year net inward migration was just 3500 but net migration in the year to July 2009 is 14,500 and it is expected to be headed for 25,000.  The average for the past 10 years has been 11,000.

This increase in net migration can be attributed to the sharp fall in numbers leaving New Zealand, particularly a reduction in the mass exodus of Kiwis to Australia seen in recent years.

This migration turnaround was a key factor in what O’Donovan saw as an impending housing shortage.  At present the housing build rate is a very sluggish 12,000 per year, “it should be running at about 20,000”.

“Given current build rate and migration, you’d actually need about 30,000 houses built to close the gap, it’s just not going to happen.

“The upside in terms of this construction cycle is huge.

“This migration and housing shortage story is certainly enough to sustain the New Zealand growth story for a good few years, three years or so.”

He said that this pick up in housing activity would translate into greater home equity withdrawal and actually spur consumer spending.  This is not what the RBNZ would like to happen as they want to see New Zealand’s recovery export-led, like it has been in most other recoveries.

However, Westpac is optimistic about a “permanent sustained lift in export receipts” driven by improved commodity prices.
O’Donovan also believed Auckland, which fell into recession earlier than the rest of the country last year due to its higher debt levels, was “leading the country out of recession”.

“Super high interest rates last year hurt Auckland more than any other part of the country, the lower interest rates this year are benefiting Auckland more than most.”

In respect of the rest of the country, prospects are also looking brighter.   When dairy prices fell they began to feel the pinch but thankfully a turnaround in dairy prices means that the worst is going to be averted.

O’Donovan anticipates that we will see all parts of the economy starting to lift by the beginning of next year.

Ref: NZ Herald

22 June 2009

Source: NZ Herald

The upsurge in net immigration gathered pace last month, with the largest net inflow since July 2003.

The net gain of 2700, seasonally adjusted, pushed the annual increase to 11,200, which is in line with the average increase of 11,400 since 1990.

But that masks the rate at which the net inflow of migrants is accelerating. The net gain of the past three months was 6600, up from 2800 over the preceding three months and a net outflow of 200 in three months before that.

It largely reflects fewer New Zealanders leaving for Australia and Britain, down 1500 (38 per cent) and 500 (36 per cent) respectively on May last year.

On the incoming side a 200 (10 per cent) increase in returning expatriates offset a decline of 300 (6 per cent) in the number of immigrants.

Economists see the pick-up in net migration as underpinning consumer spending and the demand for housing. It also expands the potential workforce but they see the boost to the demand side of the economy as faster acting than the boost to the supply side.

“Net migration was one of the key drivers behind the 2003 to 2007 economic upswing and was particularly important for the construction sector,” said Goldman Sachs JB Were economist Bernard Doyle.

“The longer net migration persists around these levels the more optimistic we become on the prospects for the domestic economy.”

UBS economist Robin Clements said the migration gain was positive for housing demand, reinforcing the improvement in affordability from lower mortgage rates and house prices.

ASB economist Jane Turner said Australia’s unemployment rate had been rising at a similar pace to New Zealand’s and with a more challenging labour market, New Zealanders were playing it safe and staying put.

“Departures to the UK have also slowed considerably, suggesting the number of young Kiwis heading on their OE [has dropped markedly].”

A Treasury research paper in April illustrated the importance of immigration to the labour supply by pointing out that some 23 per cent of the population was born overseas.

At the same time 11 per cent of New Zealand-born people live in Australia.

Between 2005 and 2007 12 per cent of migrants came to study.

Many stay on; 9 per cent of permanent migrants (those here for at least a year) move on to resident status directly from a student visa.

13 May 2009

Source: Newstalk ZB

The worst of the housing slump may be behind us, as figures show house prices growing slowly across the country.

The median house price has risen $10,000 to $340,000 since February.

The estimated number of house sales rose 17.9 percent month-on-month in April, following a 9.2 percent month-on-month increase in March. The level of sales activity has lifted 57 percent since November and now stands at the highest level seen since November 2007. However, activity remains about 14 percent below the average level seen over the past decade.

Auckland seems to be leading the market, with sales in Auckland now up 54.1 percent year-on-year while sales outside of Auckland rose 32.6 percent year-on-year. Sales in Wellington were up 23.8 percent year-on-year.

Darren Gibbs from Deutsche Bank says activity levels have now clearly moved off the historic lows seen last year as households quickly respond to the very low interest rates on offer.

“We wonder whether the recovery in activity can progress much further in 2009 (although we have penciled in a 5% month-on-month rise in sales in May) in light of the general weakness we are still observing across most of the economy, including a deterioration in labour market conditions. We will certainly be watching this data very closely over coming months.”

But he says the recovery in house sales point to a much brighter outlook for retailers and residential home builders towards the end of this year.

“This is consistent with our view that the economy will return to positive GDP growth in the final quarter of this year provided that global economic and financial conditions stabilize in line with our projections. ”

Deutsche Bank says the Reserve Bank should hold the official cash rate at current levels until around the middle of the year and not the latter part of next year as the RBNZ suggested last month.

11 May 2009

Source: stuff.co.nz

Business confidence has improved substantially in the past month, with a net 27 percent of respondents to a BNZ survey expecting the economy to be in better shape in a year.

This compares with 23 percent of respondents expecting deteriorating conditions in the BNZ’s survey two months ago and zero percent expecting change in the bank’s early April survey.

Chief economist Tony Alexander says the improvement is a record high, matched only by the results of the BNZ’s confidence survey in September last year, just before the collapse of Lehman Bros in the US.

Alexander says the numbers have wider implications for the financial markets - and for borrowers, in particular.

During the past couple of months, as the Great Depression scenario receded, investors have been shifting from safe-haven assets towards growth and more risky investments, he says.

This helps explain the near-30 percent rises in some sharemarkets, the 10c jump in the $Kiwi since early March and the increases in fixed wholesale funding costs facing the banks.

Alexander says the BNZ’s survey results, along with other recent data releases, suggests unless world economic data turns down again, there will be continued upward pressure on fixed borrowing costs.

In other words, higher interest rates.

Why has sentiment lifted? The BNZ attributes it to buyers running down stocks and needing to re-order, lower interest rates, and the general improvement in sales and sentiment in recent weeks.

But the comments from a selection of Alexander’s survey respondents show while activity might be picking up, the situation for individual businesses and operators is still dire.

Around the sectors: Advertising and marketing are depressed; accountancy is busy (”plenty of work with more advisory and budgeting work now that banks are backing away from preparing budgets with clients”, and more cash flow forecasting work and bank compliance) though clients are slow in paying; legal firms are busy; manufacturing orders are picking up domestically and from offshore; printing and publishing are bleak; property development is very bleak; commercial and industrial real estate tenants are reluctant to commit though investor interest is improving; there are significant shortage of listings in residential real estate but multiple offers and properties are selling quickly; retail is still very weak though one or two operators doing okay; tourism and travel overall are getting weaker with worries about the coming year; transport and the car industry are still weak.

Individual comments include multiple industry complaints about slow payers and tightening cash flows though one respondent in the agricultural sector said the seemingly small 10c/kgMS increase in Fonterra’s predicted payout has “done wonders for farmers’ psyches”.

Sheep and beef prices are good but margins are still short and “winter may turn up another curve ball”, another said.
Commercial construction is showing an improvement though construction overall indicates very competitive pricing and a tight market. “A lot of delays with projects going ahead due to clients trying to get more and more re-prices to get a lower price,” one respondent said.

Another said construction demand generally was still slowing “and despite government rhetoric on bringing forward capex spending on infrastructure, most government capex is being deferred.”

New home construction is still slow but ticking over quietly, said another. But yet another said in 22 years he’d never seen residential construction so bad. “[We’re] just backing the brand we’ve created and we’ll get by on much reduced turnover and profit.”

In the finance industry, the past two months have shown a significant increase in home lending levels and there has been much more general activity in the sector in the past six weeks, one respondent said.

“Banks are still very picky about deals but settlements are happening,” said another. “Business clients are still being penalised by fixed and floating rates much higher than residential ones. Winter will be tough, I believe.”

Said another: “Borrowers who have used their houses as credit cards are starting to run out of options as lenders press the mortgagee sale button.”

The legal industry says it is “generally busy both with financially distressed clients and with business sale and purchase transactions and restructures.” One Wellington law firm said its conveyancing and domestic violence work was rising.

In residential real estate, one respondent said sales were going well. “As soon as you list a property, a multiple offer scenario exists from keen buyers for properties up to $400k. Banks are lending ‘by the book’.”

“Correctly priced” properties, it seems, are selling quickly. Depending on who you listen to, the $1 million-plus market is either “almost dead” or “relatively unaffected by the economy”.

Retail respondents say sales are still weak, customers very careful with their money and recovery appears a long way away.

Education remains a strong sector, although there are worries about the future skill implications of apprentices being laid off.  Polytechs say they’re experiencing increasing interest and demand for up skill-type courses as redundancies continue.

The BNZ survey represents the views of more than 18,000 readers of Alexander’s Weekly Business Overview. He stresses the comments are the views of the survey respondents and not the BNZ. “We exclude comments which don’t say anything about current business conditions in an industry and are instead mainly rants and raves,” he says.  Comments in capital letters are also excluded.

30 April 2009

Source: Dominion Post

Business owners are still pessimistic but dramatically less so than they were last month, according to a National Bank business confidence survey.

The results were encouraging and it appeared the economy might be finding a floor, the bank’s chief economist, Cameron Bagrie, said.

“It’s about smaller rates of decline as opposed to moving into outright positive territory,” he said.

“Time and time again business confidence surveys have proved to be telling indicators of economic momentum.”

The survey of 445 business owners found a net 15 per cent of respondents expected a deterioration in business conditions, compared with a net 39 per cent in March the largest monthly improvement since 2000.

When asked about their own businesses, a net 4 per cent expected worsening conditions, down from a net 21 per cent in March the biggest improvement since 1993.

Retailers were the most pessimistic about their own businesses, with a net 25 per cent expecting things to get worse, while the agricultural sector was the most optimistic with a net 15.1 per cent expecting things to improve.

Mr Bagrie said improving sentiment may have been driven by housing market volumes picking up, tax cuts, a small recovery in dairy prices and domestic and international equities moving off their lows over the survey period.

But at the same time, financial conditions had tightened because of the stronger currency and rising fixed mortgage rates.

“After such an extended period of decline, it’s only natural to expect a base to be forming. After all, policymakers have been working hard to achieve such stabilisation since mid 2008.”

Negativity about employment prospects was down a net 19 per cent of respondents expected to reduce their workforces compared with a net 28 per cent in March but remained a key spanner in the works towards a recovery taking hold, Mr Bagrie said.

UBS senior economist Robin Clements said the figures could reflect the fact that the previous excessive pessimism had been overdone.

22 April 2009

Source: stuff.co.nz

New Zealand could be heading for a population blip as thousands of Kiwis stay home instead of trying their luck overseas.

Net migration numbers arriving in New Zealand compared with those leaving last month was the highest for 2 1/2 years at 1720.

The main factor in the increase was the lower number of New Zealanders leaving. One thousand fewer Kiwis departed for overseas than in the same month last year, with 800 fewer leaving for Australia.

At the same time, an increasing number of people are heading to New Zealand.

In the year to last month, 4000 more non-New Zealand citizens and 1400 more New Zealand citizens arrived in the country than in the year before.

The last time New Zealand had consistently high net migration figures was in 2003-2004, when a record number of migrants, including thousands of Chinese students, flowed into the country.

Statistics New Zealand demographic analyst Nick Thomson said that if the trend continued, New Zealand could have a net inflow of 20,000 for 2009 compared with about 4000 last year.

He said the biggest shift was due to the worsening economic situation in Australia, leading to a drop in the number of Kiwis moving across the Tasman, while the number of migrants entering New Zealand continued to rise.

Rob Marshall-Lee and wife Yvonne moved back to Christchurch with their three boys a month ago after eight years in Australia.

Marshall-Lee said being made redundant from his job as a senior software test analyst on the Gold Coast was a “blessing in disguise” as the family had always wanted to return to New Zealand.

He had had a few job interviews already and was confident of finding a role that suited his experience.

“I’m pleasantly surprised that Christchurch is more buoyant than I thought it would be,” he said.

“I’m very pleased that we came back. New Zealand is not as bad as people make it out to be. There’s depth in the employment market for people like me.”

James Sugrue returned to Christchurch with his wife in September after 20 months in Britain contracting as a software developer.

He said they had decided to come back at the end of 2008, but sped up their plans when he was offered a job.

“I could see the writing on the wall in the UK. Things really started to slow down,” he said.

Stuart Maxwell, general manager of Track Me Back, a website that connects Kiwi expats with New Zealand employers, said there had been a significant increase in activity on the site recently.

March attracted double the registrations compared with the same time last year, with many more high-calibre applicants in mid to senior-level positions.

21 April 2009

Source: NZ Herald

Building work started on 23 major construction projects in New Zealand last month and another 25 big contracts are in the pipeline.

Auckland-headquartered consultant Pacifecon, with 21 researchers tracking building jobs worth $5 million-plus, said it was heartened by the large amount of construction activity.

“This is generating a sense of optimism,” Pacifecon said of the 25 projects announced last month.

Of the big building contracts where site work has just started, many are in the upper North Island.

WORK STARTED LAST MONTH
* Auckland City Council’s period contract for roading renewal and maintenance in eastern area ($33 million), southern area ($31 million), Waiheke and Rakino islands ($14 million), contracts awarded to Downer EDI Works. The $7 million contract for Great Barrier Island went to Fulton Hogan.
* Fonterra Co-operative Group’s cool store in Hamilton ($50 million), builder undisclosed.
* Auckland City’s period contract for street lighting ($14 million) awarded to Transfield Services (NZ).
* NZ Transport Agency’s State Highway One improvements stage 1 at Warkworth ($5 million-plus) awarded to HEB Construction.
* Owens-Illinois Inc’s manufacturing plant in Penrose ($80 million), project manager United Group (NZ).
* Manukau City Council’s sports fields upgrade in Papatoetoe ($12 million) awarded to Dempsey & Wood Civil Contractor.
* Auckland International Airport’s expansion of arrivals processing facilities ($180 million over three years) awarded to Fletcher Construction.
* Rotorua District Council’s period contract for state highway maintenance ($11 million) awarded to Downer EDI Works.
* Rodney Surgical Centre’s two operating theatres in Warkworth ($6 million) won by Comprey Construction.

ANNOUNCED LAST MONTH
* Pacifecon listed the upper North Island projects announced last month as:
* Auckland Zoo’s elephant housing facilities ($11 million).
* Transpower NZ’s 220kV double-current transmission system from Wairakei to Whakamaru (over $25 million).
* Conversion of mixed-use buildings into hotel and office/retail in Auckland CBD (no estimate).
* Te Whare Wananga O Awanuiarangi’s educational institute in Whakatane (no estimate).
* Sacramento Apartments: Recladding of the 153-unit buildings in Botany Downs (no estimate).
* Foodstuffs (Auckland) supermarket upgrade in Rotorua ($13 million).
* New marine events centre on Halsey Street wharf extension, Auckland ($27 million).
* Innovation Waikato’s piazza and retail complex in Ruakara, Hamilton (no estimate).
* New Zealand Home Bonds’ conference centre in Cambridge ($10 million).
* Gulf Corporation’s Hobbs Point residential block (stage 2) Gulf Harbour at Whangaparaoa, 24 single dwellings and market square (no estimate).
* The Celestion Hotel in Emily Place, Auckland Central (no estimate).

WORK ABANDONED
Pacifecon also listed a large number of public works jobs which it said had been abandoned in this year’s first quarter. These included:
* North Shore City Council’s road widening at Takapuna ($9 million).
* Waitakere City Council’s parking building in Henderson ($20 million).
* Manukau City Council’s culinary theme park ($100 million).
* Auckland City Council’s CBD streetscaping ($7 million).
* Capital & Coast District Health Board’s mental health unit at Kenepuru Hospital in Porirua ($10 million).
* Palmerston North City Council’s joint venture recreational lake at Aokautere ($6 million).
* Port Westland’s rail link to the wharf at Greymouth Industrial Park ($10 million).

 Source: Dominion Post

24 March 2009

New Zealand’s economy is tipped by the International Monetary Fund to shrink by 2 per cent this year in the global crisis it has dubbed the Great Recession.

However, fund mission chief for Australia and New Zealand Ray Brooks told The Dominion Post yesterday that New Zealand was relatively better placed than other advanced countries, thanks to its low public debt, sound banks, flexible policies and mix of exports.

“This global recession is sizeable. It’s the first time in 60 years the IMF projects the world economy to shrink, and the vast economies could shrink by 3 to 3.5 per cent of gdp this year. We don’t see quite as high an impact on New Zealand.”

Mr Brooks said he broadly agreed with Prime Minister John Key’s relatively upbeat assessment delivered to trade unionists last week.

Countries that relied on car manufacturing and hi-tech exports had been particularly badly hit. Last week the IMF issued its global forecasts tipping Japan to shrink 5.8 per cent, Europe 3.2 per cent and the United States 2.6 per cent.

Food commodity exporters and “hard commodity” exporters, such as Australia, may not be as badly hit.

Mr Brooks said New Zealand would likely start a gradual recovery in 2010 and return in the medium term to potential growth of about 2.5 per cent.

A strong banking sector and a flexible exchange rate were also helping New Zealand avoid the fate of countries such as Iceland and Ireland.

Foreign debt was either fully hedged or was denominated in NZ dollars, so banks here did not have to borrow as many US dollars to meet their funding needs.

New Zealand’s key vulnerability was its level of short-term borrowings overseas.

Reserve Bank official interest rate cuts had delivered a substantial economic stimulus. That had not been the case in some countries where banks under stress had not passed lower rates on to borrowers. There was also greater stimulus from lower interest rates in the pipeline as borrowers rolled off fixed rate mortgages and the Reserve Bank cut rates again.

7 December, 2008

The Reserve Bank on Thursday 4 December cut its official cash rate by an unprecedented 1.5 percentage points to 5 percent and banks moved quickly to cut lending rates by varying amounts.

“It will provide a solid boost to business confidence and give us the chance to return to growth next year,” said Wellington Regional Chamber of Commerce chief executive Charles Finny.

Bruce Goldsworthy, acting chief executive of the Employers and Manufacturers Association (Northern) said given the softening in demand in world markets, exporters needed today’s big cut to keep downward pressure on the New Zealand dollar.

The New Zealand dollar has fallen from above US82c this year to US53c this week, increasing returns to exporters. But exporters also face the prospect of slower demand in export markets as a result of the global financial crisis.

Countries around the world have slashed interest rates to stimulate economies. This week the Reserve Bank of Australia lowered its rate by 100 basis points to 4.25 percent, taking the rate to its lowest level in 6-1/2 years.

“For exporters it’s vital that our interest rates do not get too far out of whack with those in Australia and elsewhere lest our currency falls victim to offshore speculators and/or investors in our debt instruments,” Mr Goldsworthy said.