TLDR: A new survey of views about housing affordability has found 77% think home ownership is unaffordable and 61% think it will get worse over the next decade. It also found 55% were anxious day-to-day about ever buying their first home and 46% believed their chances of ever owning were hopeless.
Paid subscribers can see more on this and ANZ’s surprise mortgage rate cut below the paywall and in the podcast above.
Elsewhere in the news this morning here and overseas:
Oil prices slumped US$10/barrel overnight to just under US$100/barrel for West Texas Intermediate and just over US$100/barrel for Brent Crude on growing fears of recession in the United States and Europe reducing demand for oil, along with fresh signs of Covid lockdowns in China, which has only just contracted the more infectious, slippery and deadly BA.5 variant; Reuters, SCMP
UK PM Boris Johnson’s leadership is in fresh peril this morning after the resignations and damning criticism in resignation letters (see more in quotes of the day below) of his Health Secretary Sajid Javid and his Chancellor of the Exchequer (Finance Minister) Rishi Sunak; BBC
European gas prices jumped to four-month highs overnight after Norwegian gas and oil field workers threatened to go on strike, which would see Europe’s second largest gas supplier (after Russia) potentially cut 60% of its supplies to Britain, which in turn would have to cut its supplies via pipeline to Belgium and Holland, both of whom are trying to stock up on gas ahead of a Northern winter without Russian gas; CNN
The euro fell to a 20-year low of US$1.02 overnight and is headed for parity with the US dollar as growing fears of recessions in both the US and Europe send investors scrambling for ‘safe haven’ assets in US and German bonds, with the US 10 year Treasury yield falling another 12 basis points to 2.78% and the German 10 year bund falling 16 basis points to 1.18%. European stocks fell 2.1% and the FTSE 100 fell 2.9%, while US stocks were mostly down; CNBC
As previewed in yesterday’s Dawn Chorus, ANZ cut its key two-year mortgage rate here by 35 basis points yesterday to a market-low 5.45%, passing on some of an 85 basis point fall in wholesale ‘swap’ rates; Interest, Stuff; and,
The Infrastructure Commission warned the preferred Lets Get Wellington Moving (LGWM) option of two new tunnels to help move cars faster was “fundamentally counter-productive” to achieving carbon reduction targets, Georgina Campbell reported this morning for NZ Herald.1
First home buyers giving up the dream
A new survey of views about housing affordability has found what many suspected. Young people still renting, many for up to 10 years, are giving up on the dream of home ownership and starting families here in Aotearoa-NZ because of the latest 45% surge in house prices during Covid, when the Reserve Bank printed money and relaxed lending rules to use the wealth effect of higher prices to support the economy.
The survey found found 77% think home ownership is now unaffordable and 61% think it will get worse over the next decade. It also found 55% were anxious day-to-day about ever buying their first home and 46% believed their chances of ever owning were hopeless.
The OneChoice Housing Trends survey of 1,128 New Zealanders aged 18 and over was conducted in mid-April via quantitative online survey. It also found:
25% said they were delaying having a family because of housing unaffordability;
24% were taking on a second job, asking parents/family for money or asking family to act as guarantors.
89% were worried about their ability to afford a home;
51% said the idea of the ‘kiwi dream’ was no longer attainable; and,
61% of those still renting now say that 10 years ago they thought they would own their own home by now.
Almost as worried as in the first lockdown
Business confidence slumped to near its Covid lockdown lows of March 2020 in the June quarter, crunched between intense cost pressures and sliding demand in some areas. The NZIER’s QSBO survey found firms’ confidence about their own situations over the next three months fell to a seasonally-adjusted minus 11% expecting better times in the next quarter, vs a positive 5% expecting better times ahead in the March quarter. This was its lowest level since the effects of the first lockdowns were felt in the June quarter of 2020.
Confidence about the general business situation dropped to a seasonally-adjusted minus 62% expecting better times ahead, down from minus 34% in the March quarter.
Businesses reported higher cost pressures and a record-high 76% said they were able to increase prices. The last time the price-hiking activity this high was in 1985, when inflation was running at 15%.
NZIER Chief Economist Christina Leung said there was nothing in the survey to "dissuade the Reserve Bank from its aggressive pace of tightening."
I spoke to Christina after attending a briefing on the survey. Here’s the interview in full:
Real estate agents decidedly downbeat
Tony Alexander published his monthly survey of real estate agents, finding a record-high net 72% saying prices were falling in their region, although agents said finding finance and interest rates were becoming less of a concern to buyers.
Mental wellbeing poorer, but we’re still mostly happy
Statistics NZ published the results of its 2021 General Social Survey, including that measures of mental wellbeing had worsened substantially since the previous survey in 2021. The decline was worst among Māori, disabled people, low income, women, the very old and the very young. Older men living in Taranaki without children were found to have the best wellbeing.
However, the survey asked about the happiness of respondents. It found 78% rated their happiness the previous day at at least seven out of 10 in a rating of one (totally unhappy and 10 is completely happy, with over a third of people in Aotearoa-NZ reported being happy to the extent of 9-10.
The survey found the media was the least trusted institution in Aotearoa-NZ, and trusted even less than Parliament.
Also, the survey found the proportion of people able to speak more than a few words or phrases of te reo Māori rose from 24% percent to 30%.
Just briefly here yesterday
Treasury banned the Wall St Journal and its reporter from nine Budget lockups until Budget 2025 after the Budget 2022 embargo was broken by an hour. Treasury
New Associate Local Government Minister Kieran McAnulty announced he would visit all 55 rural and provincial councils across the motu by council elections in July.
New Police Minister Chris Hipkins announced he would visit every Police district in the motu over the next few months.
Quotes of the day
Throwing a hand grenade over the shoulder on the way out
“It is with enormous regret that I must tell you that I can no longer, in good conscience, continue serving in this government. I am instinctively a team player but the British people also rightly expect integrity from their government.
“The tone you set as a leader, and the values you represent, reflect on your colleagues, your party and ultimately the country. Conservatives at their best are seen as hard-headed decision-makers, guided by strong values. We may not have always been popular, but we have been competent in acting in the national interest.
“Sadly, in the current circumstances, the public are concluding that we are now neither. The vote of confidence last month showed that a large number of our colleagues agree. It was a moment for humility, grip and new direction.
“I regret to say, however, that it is clear to me that this situation will not change under your leadership - and you have therefore lost my confidence too.It was a moment for humility, grip and new direction. I regret to say, however, that it is clear to me that this situation will not change under your leadership.” UK Health Secretary Sajid Javid’s resignation letter to PM Boris Johnson overnight, via full text at Sky News UK
ANZ NZ’s CEO calls for easing of migration rules
“The businesses I’m talking to this morning are crying out for staff. We’ve got this period where we need to balance the needs of the economy to be more productive.” ANZ NZ CEO Antonia Watson speaking to reporters after a speech to Australian business leaders in Melbourne by PM Jacinda Ardern. Stuff
Number of the day
Better than expected budget deficit
$5.5b - The size of the improvement in the Government’s OBEGAL (Operating Balance before Gains and Losses) deficit in the 11 months to the end of May, relative to the last forecast in the May 19 Budget 2022. The deficit was $7.53b, which was less than the $13.0b forecast in May as tax revenues were $2.9b better than expected and spending was $1.4b less than expected, Treasury reported.
Chart of the day
Firms report profitability worries, but the IRD is collecting plenty
A fun thing
Ka kite ano
Bernard
This one is not paywalled. I’ll always put -$$$ after NZ Herald for the paywalled ones. There seems little ryhme or reason for the decisions on what does and doesn’t get paywalled at the NZ Herald.
Wednesday's Dawn Chorus: Young renters give up on home ownership