Issue 2016 / 17 23 September 2016
Welcome to the seventeenth fortnightly General Finance Mortgage Commentary for 2016. We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.
The Money Market
This morning (9am on 23 September 2016) the money markets were at the following levels:
Official cash rate 2.00% (unchanged)
90 day bill rate 2.25 (up from 2.24)
1 year swap rate 2.08 (up from 2.07)
3 year swap rate 2.05 (unchanged)
10 year bond rate 2.45 (up from 2.29)
NZ/US dollar 0.7315 (down from 0.7395)
Auckland Apartment Market
Unlike Wellington, which has a longer history of apartment living, the Auckland market is just beginning to mature. It has been held back, as many earlier apartments were conversions, with some poorly done. Then there was the leaky building issue, plus a number of poor designs. This is changing, as more people see apartments as a desirable option. More apartments are being built and to a higher standard. Within the next five years, apartment living in Auckland (as in Wellington) will be considered a normal housing option. We still need more facilities to cater for apartment dwellers, especially those with young families, including kindergartens, supermarkets, the ease of getting trades people, and improved public transport.
Capital Gains Tax
A number of commentators are suggesting that one way to slow down house price growth and to stop property speculation is to impose a capital gains tax. Yet none of these commentators can produce an example where this tax is working. Across the Tasman there is a capital gains tax, but your own home is exempted, so it only applies to rental properties. In Sydney and Melbourne this tax has not worked, and house prices continue to be unjustifiably high. If the family home is excluded, how do we treat social housing provided by independent charitable trusts, councils and the Government? Property investors, when faced with this tax will rearrange their affairs to avoid it. We have an excellent case study from Australia showing that this type of tax does not work.
House Prices
Part of the issue with rising property prices, is that it is not just about supply and demand. Building costs are higher in this country than in either Australia or the USA. There is a shortage of qualified tradespeople here, which is putting upward pressure on wages. Council consents are more numerous, take longer to obtain and are more costly. The new health and safety requirements may add a further $10,000 to the cost of building a house. In the short and medium term, building costs, council consents, and Government imposed costs will ensure a continued upward movement in house prices.
Deposit Rates
General Finance is not just a lender, but it also receives money from the public, i.e. it is a non-bank deposit taker. Our mainstay rate is 5.00% for a two year term, which is attractive in today’s market. For investments over $10,000, we are flexible in paying interest either monthly or quarterly. Monthly interest suits those investors with regular monthly outgoings. We are happy to discuss this further with you and more information can be found on our website at http://www.general.co.nz/PDS.htm.
Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the General Finance Limited Loan Administration Department.
As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.
General Finance Limited is a Registered Financial Services Provider, with registration number FSP8882.