Newsletters

Newsletter - September 2024

Dawn Has Arrived!!!

Our Reserve Bank Governor believes Dawn has Arrived. Given the variables below now appearing to play out it’s hard to disagree with him.

•   Both mortgage and deposit interest rates are heading south
•   The NZX50 has rebounded strongly in recent days
•   Inflation continues to track south despite some outriders such as rates (sigh….) and even rents are perhaps reaching a ceiling as immigration slows significantly
•   Anecdotal evidence suggests that bank lending, whilst the approvals process is slow/deliberate, has become slightly more willing

A recent Stuff article states “Interest rates are on the way down and, if the Reserve Bank is right, inflation has fallen to 2.3%, the end of the recession is about six weeks away, and a period of strong economic growth is around the corner. The bank is currently forecasting the economy will grow by a seeming impressive 3.4% next year, and by 3.1% in 2026 and a further 2.2% in the following year, which is as far as its predictions go.”  Stuff, Tom Pullar-Strecker 19 August 2024.

A recent (19/8) Kiwibank weekly update states that RBNZ rate cut is August will be the gift that keeps on giving, and that household and business cashflows are expected to steadily improve. This is complemented by an ASB article the same day noting “The pressure many people have been under will start to gradually come off, helping a similarly gradual recovery in the economy.”

Let’s not leave out the ANZ who note in their August quarterly economic update “Following the rapid easing in financial conditions (interest rates and to some extent credit conditions) over the past month, tentative signs of optimism have returned, with consumer and business confidence lifting”. They further note that this economic downturn is different in that it is largely policy induced. “That’s extremely unusual. Compared to previous downturns, external shocks (global financial crises, earthquakes, extreme droughts, pandemics….) are far less of a factor. There has been no sudden income or confidence shock that would suggest the economy should be collapsing even more dramatically than it did in response to the Global Financial Crisis. Momentum is clearly weakening, but the early signs of improvement in sentiment following the easing in monetary conditions suggest there is a chance the economy could bounce back further faster than anticipated. Some activity will have been deferred not cancelled. The transmission via mortgage rates may also be quicker this cycle, given the shift towards short-term fixed terms in the past six months or so as households have banked on lower rates coming soon.”

Anecdotally our South Island office has also seen an increase in new vendor activity, with more listings coming to market and while we have several projects in slow due diligence, progress is being made with a $3.6m purchase confirmed last week and another near seven figure sale due to confirm next week. So, what are you waiting for...check out the latest offerings from Tabak and if any of them take your interest, please reach out to the relevant broker.

Damien Fahey; Partner
Tabak Business Sales, Christchurch