NZ/Aus
The New Zealand market (NZX 50 Index, -0.5%) started the final quarter of the year in the red, as bond rates continued to rise, weakening investor’s risk appetite. It was a similar story across the ditch, Australian market (ASX200 Index, -0.2%), with most sectors in the red except for real estate and materials which partial offset losses.
Both markets still in a wait-and-see mood, with the RBA due for an interest rate decision later today, and RBNZ tomorrow – both expected to keep rates on hold, but markets want hints of what their outlook will be on further hikes and when to expect the much-anticipated cut (the question being over will they pencil in a cut mid or late next year).
NZ Housing data appears to be in a tricky position, average asking prices continue to fall – despite speculation that house prices have bottomed. The latest data from real estate.co.nz shows a -5.3% annual drop in the national average asking price in September to $871,400. The higher interest rate environment is also putting pressure on lenders — 18,600 mortgages are now currently past due, a 28% increase from a year earlier. We are very bearish on housing, and it would be interesting to see how the market plays out early next year – which marks 2 and a half years since the RBNZ’s first hike. We think the current status quo of housing prices in NZ is hugely inflated and bears a striking resemblance to Ireland’s housing collapse circa 2008. (See below). I.e Those who expect Auckland prices to go back to $1mn+ are ignoring the fact that we are in a high interest world with a high cost of living — note Ockham Residential recently handed back customer’s deposits on its 165-unit project after pre-sales were not met.
Ireland residential property prices
New Zealand residential property prices
| US More hawkish messaging from the US Federal Reserve amid concern interest rates will need to climb higher to curb inflation. Michael Barr, the Fed’s vice chairman for supervision, said the big question for central banks was how long to leave interest rates elevated while Fed governor Michelle Bowman reiterated her call for multiple rate increases at a banking conference. Yields on five-year to 30-year US Treasuries rose 10 basis points overnight, while the rate on the 10-year benchmark bond hit the highest since 2007, reaching 4.7% and the 30-year topped 4.81%, the highest since 2010. As we wrote y’day, we see 10ys reaching 5.00%. |