New Zealand's biggest house-builder G.J. Gardner expanding: 30% franchise growth planned (Source)

Despite the current real estate market being in a downturn and the fact that the company’s income is down by a third, GJ Gardner’s master franchisor Grant Porteous of Deacon Homes says the national business will expand from 31 franchises to about 40 within the next six months to a year.

The company reports strong demand for franchises outside of Auckland and will focus a lot of its growth in Christchurch and the Waikato, with Porteous saying that demand is high in these areas.

Mortgages: ANZ announces more home load, term deposit rate cuts (Source) 

Further rate cuts have been announced by ANZ with the biggest change being to the bank’s longest-term fixed rates which will see four- and five-year terms dropping 45bps to 6.29%. They are also offering a two-year rate at 6.39% (standard) and 5.79% (special)

ANZ term deposit option is now 5.65% with a one-year rate of 5.1% and a two-year rate of 4.55%.

So, our question is – where will people put their money now, and if they are going to move it – when will that happen? If you fix now for 2 years, where will term deposit rates be at the end of the term? 3%? So, is it better to get into alternative investments now before rates drop?

Property's economic contribution tops $50b, while KiwiSaver lags (Source) 

According to a recent report put out by the Property Council NZ and Urban Economics, the property sector generated 15% of the country’s GDP last year to the tune of $50.2 billion. The property sector also employs 10% of the country’s workforce.

Leonie Freeman, CEP of the Property Council says that the property sector’s growth has doubled since 2012 across commercial, industrial, retail, and residential markets.

2.4 million New Zealanders were indirect investors in property through their KiwiSaver schemes. However, KiwiSaver funds’ property allocation is low at $3.6b or 3.3% of the overall KiwiSaver balance.

Freeman explains that there is a misconception that property is the domain of the wealthy. However, the average investor is an everyday Kiwi.

Our comment is that this is old news...but it is worth reminding the government. Private landlords own 70% of rental properties. So, the government needs private investment. And therefore, shouldn’t they be sending a thank you card to all these people every Christmas ...at a minimum? At least don’t take away interest deductibility again.

The property hotspots attracting the world's biggest investors (Source) 

Richard Massey, Australia and New Zealand Head of Real Estate for the Singaporean sovereign wealth fund, GIC, says the free ride in global property markets is over.

Massey believes that high rates, which are unlikely to get back to pre-pandemic lows, geopolitics, technological disruption, and cost of living pressures mean property investors need to work harder to get returns.

According to Brookfield Asset Management, this means a shift away from office and retail, a strong area of investment for Australia, and a move to hotels, self-storage, and manufactured housing. Other suggested areas include student accommodation, retirement living, and the logistics sector.

The key sentiment is select investments where value can be added in order to generate a good return.

Our comments: Several years ago, I heard a bank economist say interest rates would not be back above 5% ever. How wrong he was. Our research says that pent up demand for housing in NZ must surely translate into property price rises once the cost of funds decreases. Time will tell.

What role could KiwiSaver have in building businesses and infrastructure? (Source) 

Commerce and Consumer Affairs Minister Andrew Bayly is focused on whether KiwiSaver funds could be better used to grow the NZ economy by way of paving the way for KiwiSaver providers to invest in great NZ businesses including property, infrastructure, and venture capital. This would increase wages and offer kiwis a higher standard of living. Currently, only 2 – 3% of KiwiSaver is invested in private assets, whereas in Australia this figure is 16%.

There are currently some hurdles to overcome to generate a collective strategy on how to channel investment into NZ and the role of private capital in such a strategy. An example given by Bayly includes creating a general infrastructure fund.

Have a fabulous weekend!
From the team at Erskine Owen.