First home purchasers rushing back as door closes again on foreign buyers
National's foreign buyers tax won't survive the return of Winston Peters, say experts.
Mōrena, and welcome to The Bulletin for Monday, November 13, by Catherine McGregor. Presented in partnership with Z Energy.
In today’s edition: New government this week a possibility, says Seymour; New Covid wave hitting the country; experts divided on future OCR moves. But first, with Winston Peters in the government, National’s plan to welcome back foreign buyers looks doomed.
Door to NZ housing market slams shut to prospective foreign buyers
In another weekend of tight-lipped public appearances from the coalition talks’ key players, what wasn’t said became a news story in itself. Asked three times whether he stood by his campaign promise to reverse the foreign buyers' ban on certain high-priced houses, the incoming PM refused to comment, suggesting the policy is set for the chop. NZ First leader Winston Peters was a vocal supporter of the ban at the time of its introduction; it’s “inconceivable” that he’ll let foreign buyers back in, says Council of Trade Unions economist Craig Renney, in a Twitter/X thread accompanying his Herald column (paywalled) on the many challenges to Luxon’s tax plan posed by NZ First and Act. The loss of the 15% foreign buyers tax will “put a $3bn hole” in the tax plan, says Renney, who suggests it could be filled by cancelling the landlord tax breaks – ie reinstating mortgage interest deductibility and reducing the bright line test to two years. “These cost at least $2.3bn & offer little in economic benefit or value to the taxpayer,” he adds.
First home buyers back in force
At the other end of the property market, competition is heating up. First home buyers now account for 27% of the market, a record high, CoreLogic reports. High interest rates and cost of living pressures have been offset slightly by the nationwide downturn in property values, with the median price paid by first home buyers falling from $720,000 in 2022 to $690,000 in 2023 to date. Those lower prices won’t be around for long, according to the latest Reserve Bank survey of expectations. On average, the 37 business leaders and economic forecasters surveyed predicted overall house prices would rise 4.84% by this time next year, and 6.22% in two years’ time. Newsroom’s Jonathan Milne spoke to some of the Reserve Bank’s panel, who agree that high migration and the more favourable tax treatment promised to landlords are driving both prices higher. But it may only be a blip. Debt-servicing costs, low yields for investors relative to interest rates and a likely fall-off in migration could all lead to a steep fall in the market in 2025, Gareth Kienan of Infometrics tells Milne.
A new approach to increasing housing supply?
Speaking to Q&A, economist Shane Martin said he doesn’t expect many changes to housing policy under the incoming government. Martin, who specialises in urban planning and housing issues, says National’s approach to housing is “80% the same plan as Labour's”, despite National’s u-turn on Medium Density Residential Standards, which allow for higher density housing in most urban areas without resource consent. More important, says Martin, is that National still supports the National Policy Statement on Urban Development (NPS-UD) which requires councils to zone for housing density along rapid transit stops. Increasing supply is the key to solving the housing crisis, agrees Matthew Birchall, a research fellow at the NZ Initiative. Writing in the NZ Herald, he calls for local councils to be incentivised to support development with a cut of the tax revenue that comes with population growth. “National’s build-for-growth incentive payments and Act’s GST-sharing scheme will be steps in the right direction,” he says.
Economists sharply divided on OCR moves
What about interest rates? I think I speak for all mortgage-holders when I say I’m now utterly perplexed about which direction they’ll move next year. That’s because the experts have split into two opposing camps, says Dan Brunskill of interest.co.nz. “Hawkish forecasters believe inflation has become embedded in the New Zealand economy and the central bank will have to lift the [official cash rate] further and hold it higher for longer. Dovish forecasters think the meteoric monetary policy tightening will be more than enough to quell inflation and interest rates will have to be cut as economic activity buckles.” One of the most prominent hawks is Westpac economist Kelly Eckhold, who thinks RBNZ will likely raise the OCR again in February, and hold it there until the end of 2025. Kiwibank’s Jarrod Kerr is predicting the opposite. He thinks the first rate cut will occur in May 2024 and the OCR will gradually be reduced to 3% over the following two years. Me? I’m confused as ever.
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New government this week a possibility, says Seymour
It’s looking less and less likely that Chris Luxon will make it to the Asia-Pacific Economic Cooperation summit this week in San Francisco. He’s said he wants to go, but only as prime minister – which would require him to be sworn in by Wednesday at the latest. While that’s probably not going to happen, the three parties “seem to be making reasonable progress”, says The Post’s Luke Malpass (paywalled). “The important thing to remember is that each change and trade-off effectively adds another 24 hours to the process,” he writes. “And that’s before both Act and NZ First get to see the deal National has struck with each of them.” The Herald’s Adam Pearse says that while Luxon, Seymour and Peters are yet to have a three-way meeting, one could happen in the coming days. Seymour said yesterday he thinks “there’s every prospect of having a government by the end of the week” but there were still issues to work through.
New Covid wave hitting the country
New Zealand is experiencing a sharp uptick in Covid-19 cases despite the warmer weather, RNZ reports. Last week saw more than 5800 confirmed cases with more than 200 people in hospital with the virus, five in intensive care. Epidemiologist Michael Baker says it’s the highest hospitalisation figure in six months, and the highest wastewater detection rate since January. Director of public health Nick Jones says new waves tend to happen on a six-month cycle and the weather makes less difference than many might think. Waning immunity and the ongoing evolution of the virus over time has more impact on case counts, he says, adding that those most at-risk should make sure they are up to date with their Covid boosters and use antiviral medications early if they catch the virus.
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Welcome to the world of competitive Scrabble
In this one-off documentary, three competitive Scrabble players share their passion for the game and sharpen their skills in preparation for New Zealand’s biggest Scrabble tournament.
Click and Collect
Cuts already underway at MBIE as the public service prepares for a belt-tightening under a National-Act government.
Construction company chaired by Simon Bridges under investigation for migrant abuse.
The new $60m National Public Health Service is struggling, a progress report finds. "Very little is clear or working in an optimal way," say staff from the Māori Health Authority Te Aka Whai Ora.
Calum Henderson embarks on an epic quest to find out which celebrities have been given keys to the city – and why so many councils don’t seem to know. Tommy de Silva reports on a synthetic opioid far more potent than fentanyl that’s turning up in NZ’s drug supply. Duncan Greive reviews Old Dads, comedian Bill Burr’s grouchy new Netflix movie. Alex Casey shares a brief history of small town New Zealand beefing with international celebrities. And Tom Sainsbury reveals the show he can’t stop watching, despite himself.
Sporting snippets
New Zealand golfer Ben Campbell has come out on top at the Hong Kong Open, marking the biggest win of the Queenstown-based pro’s career.
Canterbury batsman and Black Caps international Henry Nicholls has been cleared of ball tampering following a New Zealand Cricket disciplinary hearing.
Correction: Last Monday’s Bulletin stated that the new Identity Check system is in use by Ministry of Social Development. That is incorrect: MSD is in the early stages of incorporating Identity Check into its systems and it is not yet available for use by the public.
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“Hawkish forecasters believe inflation has become embedded in the New Zealand economy and the central bank will have to lift the [official cash rate] further and hold it higher for longer. Dovish forecasters think the meteoric monetary policy tightening will be more than enough to quell inflation and interest rates will have to be cut as economic activity buckles.”
Both are correct. a period of inflation followed by a long deflation. Depends whether you are a lender and owner of debt looking to 'kick the can down the road' for as long as possible, or a believer in the inevitability of 'debt-deflation' which prediction you will state publicly.