Newsletters

Newsletter - February 2025

New Year Activity

As I chat to the various Tabak branches around the country I am heartened by the demand for appraisals and exit strategies from many vendors, often on the back of referrals to Tabak by their professional advisors.

We are also getting good demand for conversations with buyers who have come into the New Year with more purposeful resolution to start doing their own thing by way of purchasing a profitable business and leveraging that investment to create greater wealth.

Let's look at some emerging positive influences in our economic environment to look forward to:

• There has been a significant decline in interest rates since this time in 2024. With an OCR review scheduled for February, and with many economists predicting a 50 basis points cut, that would result in a decrease in short term interest rates for both mortgage and business borrowers. What is less clear is how much other fixed rates will fall. International factors, such as a relatively strong US economy, are reducing the likelihood that fixed rates longer than 2 years will fall materially over 2025.
• Further interest rate decreases should improve consumer discretionary spending and improve the business case for capital investment in the business sector.
• Improving commodity prices for some key export markets, particularly dairy, will improve confidence in key sectors of our primary industry. 
• Increasing competition for business between lenders. Anecdotally Tabak are seeing increasing competition from funders for clients' businesses, provided the credit quality fundamentals are sound.
• Residential construction costs have stabilised with the national average cost to build a ‘standard’ single storey three bedroom, two-bathroom standalone dwelling increasing by only 0.6% in the three months to December. This is half the 1.1% growth seen in the third quarter of 2024 and also below the long-term average quarterly rise of 1.0%. Combined with downward pressure on interest rates, this should lead to an increase in confidence in this sector. 

As I continue to read about exciting, little known companies doing wonderful things e.g. Fabrum Technology and Tourplan (both in Christchurch), I remain excited for what lies ahead for our new business owners as they launch into 2025 and beyond.

My acknowledgements to Stu Whitehead from FinanceNZ whose recent newsletter I have somewhat plagiarised above.

Damien Fahey; Partner
Tabak Business Sales, Christchurch