Kia Ora!
In this newsletter –
Hot tip of the month – Getting a bargain
Did you know – Australian Bank: 15th largest bank in the world
First-home buyer tips – Building your deposit
Property – Has the market bottomed out?
Investments – How is Trump going to affect my investments?
Banks – Taking their sweet time
Reserve bank – Another OCR drop and we are done for the year
Hot tip of the month
Getting a bargain
When the markets are down you can still be making money. Putting more money into your KiwiSaver or other PIE (Portfolio Investment Entity) Funds will mean that you are buying units at a better rate. So, when the markets do recover, the increased number of units will all rise in value, accelerating growth.
Did you know?
Australian Bank: 15th largest bank in the world
The Commonwealth Bank of Australia (CBA) is the 15th largest bank in the world and is as big as the US bank Goldman Sachs. CBA is the parent company of ASB bank. It is currently recognised for its strong financial performance particularly in the Asia – Pacific region. The strong returns are attracting investment from China, Singapore and around the region. Investment in CBA will give equity growth as well as returns. The key players like Milford will be watching for the changes in the region, to manage the risk, when the big players withdraw their funds for other markets.
First-home buyer tips
Building your deposit
According to the CoreLogic Affordability report, at Q2 2024 it is taking the average Kiwi 10.2 years to save for their deposit. KiwiSaver is the primary way that most people are building their deposit. It is possible to purchase a home with a 5% deposit but this can be a strain as a lower deposit will result in higher levels of lending.
To speed up the deposit saving time, start saving as soon as possible, putting aside a little each week into a savings account that is separate to your other savings and holiday funds.
If you need $150K for the deposit, we often think, you are not going to be able to save that amount this year, so you put it off starting and spend all your money rather than saving, and then next year you need $155K and you delay saving again. This becomes a self-defeating process.
A little saved often and invested in the right account or fund will get you on your way to having a deposit. Putting aside smaller amounts will still allow you to reach your goal, consistency is key. The alternative is to do larger amounts of savings over a shorter period, doing this can require sacrifices to lifestyle while you concentrate on savings. That does not sound or feel like fun!
For parents, you can set up Kiwisaver funds for your children now. This means when they start working, they can contribute to their KiwiSaver, even if their employer does contribute. It is optional for an employer to do KiwiSaver contributions if the employee is under 18 although, some good bosses do!
Thoughts from Elise
Rebecca is just back from her holiday and is eager to get some more learning under her belt. Continuing with the great support that she has been doing.
Gordon has had a great time in Aussie last month meeting his new granddaughter and spending time with family, and still managed to work on some quality of life plans while away.
The BoB office is going to be closed from Friday the 20th Dec and we are reopening on Monday 6th Jan 2025. I am off to Wellington on the 11th Dec and have a few slots available should anyone want to catch up, get in touch with Rebecca to get yourself booked in. On the 14th December, I am off to Aus with my brother and his family. A few days later I will be meeting my other brother and his family, with Sarah in Sydney and we will all be having Christmas with my mother in Batemans Bay. This will be our first big family gathering for 9 years and my 2 nieces will be meeting in real life for the first time! I will still be working while I am away finishing off the work in progress and available for support. Rebecca will be the primary contact until the 20th.
2024 has been a tough year for many and I am looking forward to a fresh start in 2025.
The BoB team wish you all a safe and happy holidays season and look forward to continuing to support you on your journey.
Property
Has the market bottomed out?
Interest rates are falling and more buyers and investors are back in the market. A Oneroof article on November 1st stated “The nationwide average property dropped 0.7% to $957,000 in the three months to the end of October. The decline was smaller than the three-month drop of 1.1% recorded at the end of September, suggesting the market has finally found the floor.”
Markets always rebound a little over the spring and summer months, so we will be experiencing the flow on effect of this in the property market. CoreLogic reports that sales listings are on the rise with 15.7% more listings than the same time last year. Maybe we have hit the bottom and now is the time to buy before the markets move again.
Investments
How is Trump going to affect my investments?
Leading up to the US elections and post the election, everyone has been asking if Trump wins (and he has won) how will that affect the markets and our investments?
As I attend various events and webinars from the variety of providers that I work with, the commentary has been mostly consistent. It is going to depend on how hard and how high he goes with tariffs. The increase in foreign tariffs is going to hold the US inflation higher for longer. The US stock markets have been performing well in comparison to the Australian market, and the NZ market has been struggling.
We can expect that the US interest rates will come down very slowly as compared to the bigger drops in interest rates which we are experiencing in New Zealand. From here on out, we expect the NZ interest rates to be dropping much slower.
Term deposit rates are going to continue to come down and most on call rates for PIE funds or standard call accounts are under 4% excluding the Bank of China.
Booster Savvy continues to offer the 4.75% for on-call funds. Contact us to help set you up and get your everyday funds earning.
Banks
Taking their sweet time
Bank turnaround times are between 7-13 business days depending on which lender you go to. If you go direct to a bank, you may get an answer within 2-4 days. This is just ridiculous. We are working our industry advocates to improve these turnaround times. The advantage of working with a mortgage adviser is that you get advice, whereas if you go direct to a bank to get sold a product.
Many a time, I have had clients that have been working with a bank and even though they are with the right bank, some small tweaks have taken years off their loan terms without them needing to increase their payments. This can be achieved by just utilising their funds and facilities using the banks products.
The OCR dropped on Wednesday 27th November and most of the banks have reacted by dropping their floating rates between 0.2-0.5%. Meaning floating rates now sit between 7.54%-6.95%. The 6.95% is at the Co-operative bank, and most people can get close to the 7% floating rates from their banks. The six-month rates are now mostly under 6% although again, the advertised rates and what is available can differ. We are happy to help with rate review should you wish, as it is also a great time to do a review of your loan structures which can give you more savings.
Reserve Bank
Another OCR drop and we are done for the year
As predicted the OCR dropped another 0.5% to 4.25% and will hold there until 19 February 2025. Reserve Bank Governor Adrian Orr indicated that the consumer price inflation is now close to the target range of 1-3, as is core inflation coming down to this target range as well.
Economic Growth has been subdued and they are expecting some slow recovery starting around mid-2025. There is excess productive capacity in the economy, and it is going to take some time for the financial stress to ease.
Employment levels and job vacancies have declined, and wage growth is slowing. There are still several government agencies that have staff yet to be released as part of the redundancies. More skilled workers are leaving New Zealand than immigrating here so, we are still under pressure for key skills.
Insurance
Protection or Quality of Life?
Insurance is the payment of a fee in consideration of the transfer of risk from you to the insurance company. The insurance is to protect you from impact of something negative happening. Good thing is that bad things only happen to other people, or is that really true??
Our approach to your quality of life plan is about understanding the delicate balance of your health, your income and your family, lifestyle and dreams. Quality of life planning gets you to think beyond just the here and now and look at needs now and in the future. When considering your quality of life you need to think about:
- The things – homes, cars
- The lifestyle – how long you are going to work, your interests and hobbies
- Family – children, education, legacy
- Investments and self-insurance
- Other obligations
Those that have gone through the process of considering their quality of life and setting up cover, or making sure that they have appropriate self-insurance, have more confidence to go for what they want and to know that their lifestyle can be maintained if something does happen.
If you want to maintain your quality of life regardless of what happens, contact Gordon Bell at gordon@bob.kiwi.nz or 022 503 9094 for a free insurance review.
Business
Get a jump start on 2025
Over the last few months, I have been talking about visions and plans. This month I want to get into a bit more detail about the vision and the plan.
There is a quote and forgive I can’t remember who to attribute it to, but it goes like this, “A vision without a plan is a dream”.
So, you have a vision, and a purpose for why you are in business and your purpose is not just to make $$, although that is a critical objective, it is not the purpose.
With your vision identify 5-7 (no more than 7) key criteria that we will call your critical success factors (CSF). Try to make each CSF a different aspect of the business, examples may be
- Branding – to be in the top 10% within your local region by date
- To increase our turnover to $xxx or by x% by date
- Team culture
- System improvements
- Product / service development
Then for each CSF break it down to 5 steps, identifying the tasks, projects and resources that are required to mee that success factor.
By not breaking down the big goals into small manageable tasks and projects you will fail to get started and do what is needed. It is a bit like saving for that house deposit. Breaking the goals down into steps, identifying the required resources and then scheduling time for the work will help you get to where you want your business to be in 2025.
Accelerate your business growth using our business mentoring and getting your business on the right track. Contact me for more details.
We are always available for a chat about your situation.
Book a meeting or send us an email.
Until next time,
Elise and the Team