Hi there!
The days may be getting a bit lighter but it’s clear that winter is in full force, with snow and floods causing more disruption across the country. Extreme weather conditions are something we need to be planning for. It is another timely reminder that we need to make sure that we have the adequate and appropriate insurance not just for our things but also for ourselves. Please email us if you want to talk insurance.
July saw the beginning of our collaboration with PlainsFM and the Finance Made Easy series: where Building on Basics hosts a series of 6 workshops on some key finance topics at the Plains FM studio, and these are recorded as podcasts. You can listen to them on the Your Community page on our website.
KiwiSaver
We’ve mentioned PIR tax rates a couple of times recently. Basically, what this means is that any income that your KiwiSaver funds earn while they are invested are taxed using the PIR rate that you advise your KiwiSaver Provider about. When you withdraw your KiwiSaver funds the tax has already been paid.
It is important to check your PIR rate for your KiwiSaver and other investments when you have a change in your income situation, eg. a pay rise, changing from being on a benefit or studying to becoming a wage earner, or stopping work to study.
To work out your PIR rate either use the tools in your KiwiSaver or go to the IRD page here.
Send us an email for KiwiSaver help, or book a meeting (face to face, or Zoom) at the Calendly link at the bottom of the page.
Property Market
Despite so much talk of our massive increase in debt-to-income ratios, rising interest rates, the property market certainly isn’t showing much of a down-turn. Whether you are looking to purchase or if you already own a property, property values seem to be holding steady or continuing to increase dependent on where you own or are looking to purchase. Properties at auction are still selling well above the expected price.
In his latest newsletter, economist Tony alexander writes that “The ratio of debt to income in the household sector has increased from around 60% three decades ago to 166% at the end of 2020… One reason debt levels have risen so much is that interest rates have been falling for the past three decades… Of all registered bank mortgage lending 78% is to owner occupiers ($225bn) and 22% is to investors ($86bn).”
It’s not all doom and gloom if you’re trying to buy your first home. This from CoreLogic “Of course, a looming rise in the official cash rate will also directly affect the housing market, with borrowers already seeing mortgage rates increase – and from a low base for rates (as well as larger debts), that could have quite a strong effect. Then you’ve also got to add in the pre-existing effects of affordability pressures, 40% deposits for investors, the extended Brightline Test, and the tightening of interest deductibility rules (as well as the approval for the RBNZ to look at debt to income restrictions). Certainly, mortgaged investors’ share of property purchases has fallen in the past 2-3 months, albeit there are few signs that current landlords are looking to sell.”
Banks are still lending, and house prices in the Canterbury region are less eye-watering than in many other places! Remember that if you’re looking to buy you need to be well prepared before you jump in. That’s where we can help, please get in touch if you would like us to help you achieve your home ownership dream!
Banks and Finance
Interest.co.nz reports that $2.36 billion worth of interest was charged during the June quarter. This is lower than any quarter dating back to 2014. This is in large part because of the record low OCR of 0.25%. This low quarterly interest charge is likely to be unbroken for a while as banks increase their 3-5 year interest rates in anticipation of the OCR changing, possibly as soon as later this month.
Banks and Lenders in general are preparing for the upcoming changes to the CCCFA and are continuing to adjust their processes and the information that they require us to supply them when seeking lending.
Book an appointment if you would like to discuss your situation.
RBNZ
The Monetary Policy announcement on the 14 July kept the OCR at 0.25% and the RBNZ has indicated that the New Zealand economy remains robust despite the impacts of Covid-19 (particularly in regards to ongoing border restrictions).
The RBNZ have indicated they expect a spike in the CPI in the Quarter June to Sept. The CPI is the Consumer Price Index, so what this means is that we can expect an increase in the price of standard goods that we purchase. The RBNZ notes that there have been modest wage increases for some. With the constraint on goods coming into the country due to lack of production and the continued shipping challenges, many suppliers are now passing on price increases to retailers and direct to consumers.
The next OCR review is on 18 August and there is a chance the RBNZ will increase the rate at this time.
An update from us.
As well as our busy work lives, the team have a few things going on outside of the office.
Elise’s Wellington renovation is going well, and the house is good enough to camp in (picture below!). Eroica is at the start of a new build, with all the challenges and excitement that involves. Did you know that consent is taking about three times as long as usual at the moment?
We look forward to hearing from you if there is anything we can help you with and do keep an eye on our Facebook and blog for useful information and tips.
Until next time,
Elise and the Team
