August 31, 2023 • 53 mins
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Today we sit down with the esteemed Steve McMenemy, director and mortgage advisor at Loan Market Auckland. As a veteran in the finance industry, Steve provides us with a deep-dive into the intricacies of the New Zealand property. We walk through the projected growth in the Massey area, and Steve unpacks the vulnerabilities and opportunities in the new build market. In light of the Unitary Plan, we also discuss its impact on the housing market and new build projects.
Shifting gears, we delve into the current housing market and the psychology of first-time buyers. Steve shares valuable insights into the factors stoking increased demand and gives practical advice to those grappling with affordability in this fast-paced market. In the wake of recent changes in property investor borrowing, we dissect the implications of removing the ability to offset mortgage interest costs as a tax deduction, as well as the loosening of LVR restrictions.
To wrap up our discussion, we turn our attention to the evolving trends in apartment living and reflect on the Reserve Bank's influence on the market. We also explore the role of debt-to-income ratio in bank policies and why more Kiwi are turning to brokers for their mortgage needs. Steve's unique insights and experiences provide a fascinating perspective on these topics, making this a must-listen episode for anyone interested in the New Zealand property market. So tune in and enjoy this comprehensive ride through the NZ property market!
Contact Steve at:
https://adviser.loanmarket.co.nz/steve-mcmenemy/
https://www.instagram.com/steve.mcmenemy/
loanmarket.co.nz/steve-mcmenemy
021 743 494
Sign up for news and insights or contact on LinkedIn, Twitter @NickGoodall_CL or @KDavidson_CL and email nick.goodall@corelogic.co.nz or kelvin.davidson@corelogic.co.nz
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Kia ora and welcome to a special guest edition of
the New Zealand Property Marketpodcast brought to you by
CoreLogic, produced by Agents TV.
I'm Nick Goodall, head ofResearch at CoreLogic, and today
I am joined by Steve McMenamey,and he is the director and
mortgage advisor for Loan Market, based out of the west of
Auckland, in Massey, I believe.
Is that right, steve?
Speaker 2 (00:35):
North West Auckland.
We're on the top of the northwest shopping mall, down at the
bottom of the north westernmotorway.
There.
Speaker 1 (00:42):
Nice mate, and how are things going out there?
Speaker 2 (00:44):
Very good yep, it's a pretty dynamic market right now
actually, which might surprisesome people, but yeah, it's a
good area to be in and it's apretty good market to be in
right now.
Speaker 1 (00:55):
Yeah, cool, nice newish area too, isn't it?
In terms of the developmentsaround that area and lots of
fresh homes going up, I suppose,in the last few years, which
must make it a nice area to bepart of.
Speaker 2 (01:05):
Yeah, yes, a huge area in terms of planned growth,
I think, probably one of thebiggest sort of planned
developments in the countryactually.
So, yeah, there's a lot goingon.
Speaker 1 (01:14):
Yeah now, I find it a really interesting one and a
cool area to visit.
But look, we'll get into thedetails about your local market,
and a bit of the broader stuffas well, shortly.
But before we get fully into it, I thought it'd be nice to just
tell us a bit more aboutyourself how long you've been an
advisor for do you have afamily we just said beforehand
that you've got a child at hometoday and what do you do to keep
(01:36):
yourself busy and entertainedoutside of work?
So give us a bit of an intro toSteve mate.
Speaker 2 (01:41):
Wow, oh man, how long have you got?
This is my favourite topic.
So, look, yeah, married kids.
That keeps me fairly busy, asyou can imagine, in terms of
work.
Look, I've been around thefinance industry for actually
for 20 years.
(02:02):
It's been a long time, you know.
I've seen a lot of changes.
I've sort of always been in themortgage-broken space, but I
have taken some time out of theindustry over the years and sort
of explored sort of relatedareas as well, which has kind of
only really added to, I guess,what I offer.
So, for example, I've donequite a bit of private land
(02:25):
development and new buildconstruction along with my
business partner, like quite afew hundred new builds over the
years.
Also spent time working withwhat used to be called Housing
New Zealand, so it's going onnow.
So I was acquisition managerthere for a while, which was a
(02:45):
really interesting thing to be apart of.
So with my time there withhousing, I was in that area of
sort of seeking out jointventure opportunities to bring
the public and the privatesector together and for joint
venture in full housing outcomesfor social housing.
(03:05):
So that was a reallyinteresting month for me there
too, because that was as theAuckland Unitary Plan was sort
of coming into fruition and wewere sort of using that at the
time to achieve the sort ofdensity that we hadn't achieved
in Auckland before, and so to bepart of that and on that scale,
that scale you can only achievein that organisation here in
New Zealand.
There's no one else anywherenear that size.
So that was really reallyinteresting.
(03:29):
And so when I take what I sortof glean from that role and
glean from my own personalexperience within that sort of
private development, and thenbringing that back into my
finance, it enables us to offera lot more than maybe just the
traditional broker does.
So, yes, the bread and butterof our business is always going
to be residential mortgages, butwe're able to do a lot more on
(03:51):
the commercial side as well.
We have quite an interest anddo quite a bit of work with
development and developmentconstruction in particular.
So very, very different beastthat one, but it's something
that we're all quite skilled atwithin our team as well.
So, yeah, so I guess to sumthat up, right many years within
the industry, but sort of alsosort of branching out to bring
(04:13):
those other skills back into thefinance part.
Speaker 1 (04:16):
Yeah, that's awesome and I love and that broad
experience just gives you such agood perspective on things.
You know you can see it fromthe other side of things when
you're trying to do a deal for anew build for a client,
whatever it might be, andcertainly when you're on that
side of things with thegovernment and kind of order or
say, how's New Zealand as itused to be, you know what an
amazing experience to have thereas well, to have that under
(04:37):
your belt.
So, yeah, no doubt gives yougreat perspective and anyone
that's close to that new buildside of things to us it
fascinates me.
It's obviously a really keypart of the market, one that
we're always trying to get ahandle on, and obviously has
shown some vulnerability too aswe go through this downturn in
the market and a fewliquidations too.
So anyone yeah, massively.
Speaker 2 (04:55):
We see that on every cycle.
Actually, you can almost setyour watch to it, so it's not
surprising, but it's alwaysinteresting.
And it's been a little bitdifferent this time around
because the Unitary Plan openedup so much more opportunity for
it and, as you'll know, thelevel of consenting was huge.
And then there was alsoincentives for buyers to be in
(05:18):
that new build space as opposedto existing.
You know, particularly forinvestors and for first home
buyers, there was advantageswith being in that new build
space, but they offer differentthings to the existing houses in
terms of section size andprivacy and those sorts of
things.
So, you know, there's thesedifferent things pulling people
in different directions there,and it's been really interesting
(05:39):
over the last year to see theas the values of the existing
stocks kind of retreated, theswitch of people going back from
the new builds to the existingstocks being quite an
interesting one as well.
Speaker 1 (05:54):
Yeah, I noticed a little bit of nervousness there
playing part there, right, andwhy.
I'll talk about more about newbuilds shortly.
Yeah, the thing I just want totouch on was you know the
history on loan market andobviously I recently attended
your Trans Tasman Awards Night,which was an amazing couple of
days and some impressive figuresin terms of the awards being
thrown around.
So I wondered if you could justtalk about you know what makes
(06:15):
loan markets such a successfulbusiness, why obviously you're
involved with the group and whatare some of the important
developments in the business yousee as sort of keeping you and
your business ahead of the pack.
Speaker 2 (06:27):
I think there's a couple of really key points for
loan market which is why we'repart of it is one would be the
scale.
So you know it's a businessthat spans New Zealand and
Australia, so it's got a lot ofscale and I guess that gives a
lot of hallmark.
But it's a business that'sheavily invested in and run
(06:51):
extremely well in terms of thetop level of management and you
know both of those points.
You know that filters throughto just better outcomes.
So it's better outcomes for thebrokers and because of the
support that that provides andthat in turn, gives a better
outcome for the clients.
And you can see, if you look atsort of you know, the average
(07:14):
performance of, say, the averageloan market broker compared to
just the industry as a whole, ittends to always be, you know,
notably higher.
And it's a business that'sheavily investing in the future
as well.
So there's, you know there's alot of talk right now about AI,
(07:36):
open banking.
You know what does it all mean?
Does it mean things are goingto change?
Well, you know, probably itdoes, but it's about trying to
be ahead of that curve andthat's, you know, it's kind of
like a bold new world and youneed a bit of horsepower to be
ahead of that curve in, you know, in any meaningful way, I
suppose, and that's somethingthat the loan market brand
(07:58):
offers.
Speaker 1 (08:00):
Yeah, not for sure, and I think it's just that push
towards more digitisation rightand being able to do things
faster and easier and givingthat customer at the end point,
a way better experience and,like I said, any person of any
decent size can enable that tohappen with greater tools,
greater partnerships and allthat sort of stuff too.
So really just to see how itgoes anyway and the future
(08:20):
developments as we move through,as you say, some pretty
exciting times for the bankingand finance industry.
So I like that, mate.
Right then let's get into themarket then, mate.
So I know that any mortgageadvisor worth their weight is
keen to talk about the currentmarket, and what I wanted
especially for you is to talkabout anything that might be
(08:42):
relatively unique for your areaor the type of clients that you
talk to.
I'm sure that you don't justdeal with, you know, northwest
of Auckland, whether you stretchacross the whole of Auckland as
well, but really what you'reexperiencing right now maybe
recent changes as well, acrossdifferent buyer types, different
property types as well, whetheryou sort of get involved in
(09:02):
what's happening around units noapartments or townhouses and
houses and then definitely, ifyou've got any insights on
what's happening with those newboards, just sort of touch them
up before a swing back towardsexisting, but whether that's
going to continue on forever.
So, yeah, give us a sort oftake on the current market and
potentially some you know futurethoughts where the market might
(09:23):
go to as we move through therest of this year.
Speaker 2 (09:26):
Yeah, okay, man, that's a massive subject Because
we've got I guess we've got thecurrent market, but then we've
got the different types ofbuyers right.
So we've got first home buyers,then we'd have, you know, the
second home buyers, or clientswho are trying to sell a house
and buy another one, and then Iguess you'd probably say third
buyer group set would beinvestors, and so, yeah, they're
(09:50):
all very different.
So the first home buyer market,that's a really busy one right
now, for sure.
So there's been a lot, I thinkthere's been a lot of sort of
pent up demand there coming offthe back of beliefs, I guess.
So the psychology and somethingyou know chat about sometimes.
(10:10):
You know when, when, when, ifyou're a first home buyer and
you and all of your friends andeverything you read is
suggesting that interest ratesare going to continue increasing
forever and property values arefalling and the market's going
to crash, then would you go, hey, should we buy a house this
week?
You know, probably not.
So you get a whole lot ofpeople sort of standing on the
sidelines, and if you get enoughpeople standing on the
(10:32):
sidelines, then everyone justdoes the same thing.
So now everyone's on sidelinesand that's what we've
experienced over the last sortof year or so, right, but that
that that belief systems change.
So I think enough peoplebelieve that interest rates have
probably peaked or thereabouts.
You know I'm you know with thereasonable signals out of the
Reserve Bank that that'sprobably the case, unless the
(10:54):
numbers that come through startlooking a little less favorable.
but you know, we're probablythere thereabouts give a take a
little bit for volatility.
And there's I think there'ssome pretty reasonable anecdotal
evidence that would suggestthat property values, you know,
probably did bottom out.
From what I see and it's justfrom what I've seen I would
probably say may for us wasprobably where we saw the bottom
(11:16):
, where we're sitting, and youknow, time will tell.
I suppose sometimes you're await a few months to find out
where the bottom actually was.
And so enough people think, hey, it probably is not going to
get any cheaper.
In fact it might start to costmore.
An interest rates aren't goingto get any worse.
I can afford it now.
This is as bad as it's going toget.
But I can buy a house for maybea couple of grand hundred well,
(11:36):
a couple of hundred grandcheaper than I could have a
couple of years ago.
So all of a sudden it goes fromlooking terrible to looking like
, hey, this is actually a reallygood time to buy and it happens
really quickly, like I meanreally quickly.
So for us it probably happenedin July, but literally all of a
sudden everyone we're talking towanted to buy a house yesterday
.
Where has we had been talkingto people who were sort of
(11:59):
looking and then not looking andthinking and you know, and sort
of dealing with them for sixmonths.
And now we're now all of asudden everyone's buying.
And obviously I talked to a lotof real estate agents and
whatnot and they're allexperiencing the same thing,
like literally a switch got hitand now everyone's keen to buy.
So it's become quite aninteresting time.
(12:19):
Now you know where there'sprobably more people wanting to
buy than there are peopleconsidering selling.
So you know that'll have itsown dynamic.
Speaker 1 (12:29):
Let's get to the first-time buyers.
I've got a question on that.
So you're talking aboutabsolutely the psychology, the
sentiments changed.
We sort of talk about as wellthat you can quantify that worst
case, as you said no propertyvalues like unlike the job,
further interest rates unlikelyto increase too much.
That's all good when it comesto I want to buy, you know I'm
keen, I can't see things gettingworse so I'm going to do it.
(12:49):
How do your conversations goaround people being able to buy,
so that affordability pressure?
You know the difficulty forpeople now to still borrow a
relatively large sum of fundsand a relatively high interest
rates with income that might bedecent but still hard to pass
those serviceability tests.
How are those conversationsgoing for you?
Are you turning many away oryou know, and tied into this,
maybe triple CFA staff aroundexpenses?
Speaker 2 (13:11):
How are those?
Speaker 1 (13:12):
conversations going now around trying to adjust your
expenses to ensure that you cansatisfy the criteria to get a
mortgage.
Speaker 2 (13:18):
Yeah, that's.
That's a really good question,because it is.
It is tight, like everyoneknows that.
So you know, every time theinterest rates go up it means
that every one of us can nowborrow less than we could the
day before because, you know,our incomes probably haven't
increased at the same rate andso and I guess that's part of
what filters through into themarket and has a negative impact
(13:42):
on values and helps, you know,sort of pull that back into line
as well.
So so one of the things is, youknow, people aren't typically
expecting to spend the sameamount of money now.
Anyway, you know, you probably.
You know, buy something todaythat would have cost a couple of
hundred grand more a couple ofyears ago.
So, yeah, the interest rateshigher, but the property prices
or the size mortgage will takeout is going to be lower, which
(14:02):
helps compensate.
Personally, I'd rather pay lessfor a house because you know
the purchase price is permanent,interest rates temporary, you
know, but the reality is is yourservicing is very tight.
Access to finances is reasonablycyclical.
We go through a tighteningphase, we go through a loosening
(14:23):
phase.
We've seen a couple of thingsrecently where things have got a
little bit looser In terms ofthe amount of risk banks are
having to factor into things,because they see where we are as
well.
If you're at the bottom andyou're expecting things to get
bad, then I guess you put a lotof risk in.
If you think things aren't thatbad and things are probably
(14:46):
going to get better, you can getaway with less risk.
So those sorts of tools thatthe banks use as well to try to
keep things as free as they canwithout being irresponsible.
But the reality is people arenot able to borrow as much as
they were previously.
But when we look at the actualcost of the mortgage, they'll be
pretty happy with that.
(15:06):
If someone wants to borrow$750,000, but they can only
borrow $650,000, when you showthem what $750,000 would
actually cost them per week,they just fall over.
So it's not like they don'tstill want that figure once they
realise what it will cost.
And they can probably still getwhat they wanted with this
(15:30):
reduced mortgage anyway, becausethe value is dropped.
So it's a funny one.
So it's not as bad as you mightthink, I guess, as we're coming
to there, when you consider it,what it actually means to
people.
Speaker 1 (15:41):
I guess it's a bit of adjustment of expectations,
right?
Is that?
Yeah, you could get thatproperty and live in that area.
But if you really want to get aproperty and live in that, stop
renting, then adjust yourexpectations.
You can still get into themarket and it doesn't have to be
your free for home straightaway.
So I suppose the ability toadjust those expectations is
really important for afirst-time buyer.
Yeah, it really is.
Speaker 2 (16:04):
And one of the good things now, though, is they've
got a lot more options.
So, you know, it's because it'snice to go.
Oh well, you know we used toget 2.5% interest rates, and,
yeah, that was lovely.
It was never going to last, butit was great.
But the you know, the downsideto that was, when the buyers
went to the auction, there was50 people bidding on the house,
and they got outbid by $200,000.
That's quite, you know, that'ssoul destroying.
(16:26):
So it's like like it's neverperfect, you know.
So, yeah, the interest rateswere lower, they could borrow
more, but the house, like, itwas so hard to buy anything.
Now they've got a lot moreoptions.
Prices are way more reasonable.
Yes, they can borrow less, butthat's okay, because prices
reduced, the interest rates arehigher, but at least they can
(16:46):
get in there and negotiate andactually buy something.
So it's, yeah, I don't knowwhat perfect looks like, but I
don't think I've ever seen it.
Speaker 1 (16:55):
That's a good point.
But, like I say, at least thatdesperation is not quite there
at the moment and that's got tobe a good thing, that you don't
feel like you're being forcedinto a decision really quickly
and that's not good for anyone.
Best home buyer, massivepurchase, massive life decision,
and you feel like you're beingpanicked into it because, like I
say, an auction or something inthis with other people and I
like your point around theoptions too, in terms especially
(17:16):
in Auckland, right, we knowthat it's got the broadest range
and type and value of property,largest city, massive.
You know all different types ofproperties available across the
city and different locations.
I know some people willprobably be pretty wedded to
certain areas.
I have to live on the NorthShore or I have to be in the
East Coast base, whatever itmight be.
But generally if you arewilling to adjust those, you can
(17:36):
have plenty of options outthere.
So that's the manner of beingflexible for that.
And first home buyers that'sreally key.
But look, we can probably talkabout the psychology of first
home buyers forever.
Can you get your thoughts aswell on that investor market and
what conversations look likewhen you're talking to an
investor?
These days obviously have beena recent loosening of the loan
to value ratio restriction, thatthe positive requirement has
come down all very slightly, andthen of course we've got the
(17:58):
consideration for whetherthere's an election or there's a
government change of coursewith the election coming up and
even nationals policyannouncements yesterday around
tax changes which could have aninfluence as well.
So we don't get into all thatdetail, but just your take first
on conversations you're havingwith investors.
Has that psychology changed forthem too?
(18:19):
Are they coming back into themarket?
They can see the floor of themarket and they want to start to
put their money back intohousing, or how those
conversations going for you?
Speaker 2 (18:29):
Yeah, that's been a really interesting one because
it's not been easy to be aproperty investor for the last
few years.
Right, it's only got harder andharder and harder.
And so the recent loosening ofthe LVR restrictions I haven't
really I haven't seen an impactfrom that, because the probably
(18:52):
the bigger issue for propertyinvestors is literally just the
affordability and what thatmeans to them.
So you know, within thatinvestor pool, you know you've
got some people who are verysort of independent.
They've got quite a largeportfolio, they've done it
forever.
You probably call them aprofessional investor and
(19:12):
they're reasonably self-funded.
But the reality is mostproperty investors are mom and
dad type of investors who mightown one or two properties and
that's all they'll ever own.
That's you know.
Most of the investor market ismade up from those people, and
the access to that funding isprobably the biggest issue.
(19:33):
So the affordability, it's gotharder and harder for the
investors.
So there's been some significantchanges.
So one was the amendment to thetriple CFA, which meant we now
had to sort of account for morethings that were kind of
accounted for anyway.
For an example, the rentalincome that was always going to
(19:55):
be shaded back to, you know,let's say 75%, to allow the
other 25% to be used for thingslike insurance and rates and
maintenance, maybe some downtimewhen there's no tenants, but
now we're having to sort ofstill do that.
But then also factor in theactual cost of rates and
insurance is things.
So it's like double dippingthere.
(20:16):
But then a massive blow hasbeen the removal of the being
able to offset the cost of themortgage or the interest cost of
your mortgage as a taxdeduction.
And so what that means in realterms obviously is someone who
probably didn't have a taxableposition at the end of the
financial year because the moneyhad all gone on rates,
(20:39):
insurance, the mortgage that'sthe massive one, you know
improved maintenance, etc.
Like you literally come out theend of the year with no money,
but suddenly now you're in ataxable position, so you've got
no money and a tax bill.
So that's real money coming outof people's pockets.
So so the banks have to accountfor that, and so they've had to
change the calculations that wecan use as well to account for
(21:01):
this other massive tax expense,which and so all of these things
just means your ability toborrow money is just going down,
down, down, down, down, down tothe point where you might get
one house, unless you've got areally strong income, at least
here in Auckland, you'reprobably not going to get
another one, whereas maybe lastcycle there was the ability to
(21:24):
get another one or even twopotentially.
So the access to those funds iswhat's probably hampered that
market more than the LVRrestrictions itself, because the
reality with the LVR, mostinvestors aren't walking around
with a few hundred thousanddollars in their pocket for a
deposit.
They're actually going to useanother asset, probably their
(21:46):
home, that's got equity thatthey've built up over the years
and we're going to leverage offthat.
And so you know whether theyneeded a 20% deposit or a 40%
deposit.
It was probably neither herenor there.
They probably had access tothat in their existing equity
position.
It's just been actually thedebt servicing that's absolutely
killed it.
And the recent you know all fromthe not recent now, but all the
(22:09):
changes that were made underthis current government and in
terms of all the added costs,and then you know, losing that
big tax.
I was going to say incentive,but that's not fair because it's
not an incentive.
That's just sort of normalbusiness practice, isn't it?
Maybe you've got to take onsome debt for your business to
expand, then you can offset thecost of that finance.
(22:31):
But so that's the biggest thingfor them, and so I think you
know for us we've seen verylittle on from the investors
over the last couple of years.
Understandably, investors tendto like older properties that
they can buy and quickly addvalue to and then bring back and
(22:51):
into the rental market, and youdon't get that opportunity with
new builds.
So typically you know if it'snew it is what it is and it's
worth what it's worth on the day, and nothing you do is going to
change that.
So that's kind of lessappealing, even though they
still have the tax advantage.
So I think that there will bequite a few people who are
(23:12):
almost ready to go, who willactually wait just to get a bit
more certainty.
I know National came out withtheir policy was it yesterday?
You know that's what they werewaiting to hear.
But now they're probably goingto want to get a bit of feel for
whether they're actually goingto form a government, and so
they can, because that willactually have some impact for
them, albeit it's going to looklike it's going to be staggered
(23:33):
over a few years, but it isprobably.
For some.
That is the good news they'reprobably waiting for to reenter
the market.
Speaker 1 (23:41):
Yeah, I mean again almost comes down to the
sentiment change.
Right, it's just like a youknow that there's a path forward
here and if they do feelconfident in recent polls
certainly look, look likely fornational to form the government.
So really savvy investors mightlook at that and say better to
get in sooner rather than later.
We accept that they're probablygoing to be better in the
future.
Sentiment could drive crisishigher faster as well, and so
(24:02):
they definitely look to get insooner rather than later.
I think I still have ajournalist yesterday and out of
the point that you know we doexpect debt to income
restrictions to come in nextyear as well, and the Reserve
Bank even if there's a newgovernment, of course Reserve
Bank could do that anyway.
And so again, from aninvestor's perspective, I'm like
man, I better get it now.
If I don't now, then I'll waittill next year.
I might actually not be able tobecause the debt to income
(24:25):
restrictions will actually limitme being able to get a mortgage
.
So that could also cause peopleto bring forward their
purchases.
So, you know, I do think it'san interesting time for those
investors and how much thatsentiment and expectation and
maybe hope in some cases theycan change their behaviour and
bring those that activityfurther forward and they get
into the market sooner, whichyou know, strangely enough, will
then add more activity.
(24:47):
Now, more demand pushes pricesup sooner as well, so it can
always be a self fulfillingthing as well If we do say
enough of that momentum changeto come into it.
So really intriguing one towatch, no doubt about that, and
a couple of months now, lessthan couple of months for the
election, it's going to be avery interesting time as all
these parties play the politicsand you try and read between the
lines and see what's just aboutGrabbing and what's real.
(25:09):
And yeah, certainly certainlyinteresting one, it's for sure.
Speaker 2 (25:12):
Yeah, yeah it is.
The elections are always play abig part in the sentiment, for
sure, even though a lot of whatpeople are sort of waiting for
won't really impact them anyway.
But there just seems to be whathappens around elections.
Speaker 1 (25:28):
Okay, well, other than sort of the biotypes of
that psychology, is thereanything else in terms of maybe
differences you're seeing in themarket or differences you
expect in the market Aroundeither property types, so houses
compared to apartments or flats, if you do deal with those
types of properties and or abovecertain value bands?
So do you see more activitybelow million dollars, for
(25:49):
example, and you're seeing thatthe upper end of the market
struggle, or is there anythingkind of, from your perspective
and your dealings, that you'reseeing that a difference is
across those property types orproperty values at the moment?
Speaker 2 (26:00):
I think the biggest thing for us right is is seeing
Maybe that sub million dollarmarket that was, for you know
just from where we sit and sortof anecdotally, that appeared to
be the one that was, you know,affected the quickest as things
slowed down.
But, you know, on the otherside of the corner it's being
(26:24):
affected quite quickly as thesentiment's turning around,
because I think that's probably,you know, that is the biggest
pool of buyers, being the firsttime buyers, who tend to be sort
of in that sub million dollarmarket and like, as we're
already discussing, withouthaving to compete with the
investors as well.
So if a lot of investors comeback into that market space and
I don't think we'll see them on,you know, typical investor
(26:46):
volumes because it is stillreally difficult for them to get
money, but you know, if we geta few more investors coming into
that space, then it will becomeeven more dynamic.
So that's probably the biggestone for us.
In terms of the apartment space, New Zealand loves houses,
right, and slowly coming aroundto so high density living, it is
(27:06):
becoming more and moreacceptable, I guess, and some
people see it as a lifestylechoice.
You know they'll lock and leaveapartment.
No, no long term moment things.
That sounds quite nice, but onething we do see it, we do see
it quite clearly actually islike if the people are saying,
you know, talking about themarket as a whole or the markets
picking up, what we'd see isthe we tend to see the apartment
(27:29):
market doesn't appear to be, itseems to be, it seems to lag.
So I think a lot of people whoget into apartments did do so
when the markets getting quitetricky and they're missing out
on property and the valuesincreasing and they're kind of
you know, looking at what can Inow get for my budget on this
(27:50):
half falling down house?
That smells funny, it's, youknow.
You start to get quite you knowdown on that and you start
looking at other options.
One option is that you lookfurther out, you know, because
typically the further away fromtown things tend to be a little
bit cheaper.
But another option that somepeople do look at is oh, if I go
closer to town and look at anapartment, what does my
lifestyle look like?
And it can actually start tolook really attractive.
(28:12):
And that's why I think we seethat lag and once that market
picks up, that starts to bequite buoyant and dynamic as
well.
But from what I'm seeing, Idon't do a massive amount within
the apartment space, but I doenough to sort of see what's
happening there and it stillappears to be reasonably quiet.
So you know, apartment livingis your thing.
(28:34):
It's probably a really goodtime right now, to be honest.
Speaker 1 (28:37):
Yeah, I wonder if it's another one to watch for
the future.
We're seeing, obviously, apretty big increase in tourism
and people that are doing shortstay Airbnb.
You can have your apartment onthose sort of sites as well,
which tracks, tracks.
Those tourists, excuse me, andalso international students
coming back to study in NewZealand too.
Obviously they're very keen tolive Close to town, close to
(28:58):
university, don't have cars orwhatever, so happy to be walking
.
So I think, as demand for thatstarts to come in as a tenant to
be ready to go to Best iscertainly start to see the value
stack up where you can getdecent rent and cheaper purchase
price than what you're You'rehaving to pay for a house, and
the numbers might stack up alittle bit better as well.
So, not only from a, like I say,an unoccupied perspective, but
(29:19):
also from the best ofperspective, might start to see
things continue to change asthey move throughout this year
and maybe more so as next yearanyway.
So none of that that's reallyinteresting and good insight
there, and all right, my will.
In terms of outside the currentmarket, other factors to look
for and maybe part of now, yourinteractions you're having on a
regular, regular basis to.
I wonder, like how much yousort of pay attention to
(29:40):
everything that goes on thereserve bank.
We feel like we're kind ofconsistently just waiting on the
next announcement from reservebank, and if it's not the OCR
and the multi-policy statements,there's something else they're
always releasing.
And how much do you followwhat's going on?
The opposite, it's prettyimportant interest rates, which
are dictated by the reserve banklargely.
And do you so just payattention to the OCR or is it
much more than that, that you dosort of keep a track of what's
(30:02):
going on?
You know, down the road here inWellington at one of the
terrorists, yeah, that's.
Speaker 2 (30:09):
Yeah, I mean because you can go down a bit of a
rabbit hole and Get too busytrying to keep up with the
reserve bank that you forget towrite mortgages.
So it's probably more, more ofa high level in terms of
following them.
So, yes, the the OCR issomething that we want to be on
top of so that we can Get a feelfor where that's at, because
(30:29):
we're having those conversationsdaily with people who sort of
want our take on things.
But, as well as the OCR, Ithink it's listening to the
message.
You know what's the messagethey're giving out.
You know, is it a, is it awarning shot?
Because they're quite good atsaying things as a warning shot.
You know the debt to income, Imean, that's, that's been a
(30:52):
warning shot for months andmonths and months now, and you
know they'll.
I think it's a tool thatthey'll definitely use when they
feel they need to use it, butit's, I think it's been used as
a more of a warning shot Upuntil today, and the reality is,
is most banks actually use thedebt to income as a bit of a
guide.
Anyway, it's not like a blackand white tool that they use,
(31:14):
but it is part of theirdecision-making process.
So they kind of do take that onboard and sort of use it behind
the scenes, and I think that'sprobably why the, the reserve
banks, sort of chuck thosethings out there as to, hey, if
we say it and if we threatenthese things, then hopefully the
market will just do it anyway,and now then we won't have to.
You know, I think that's kindof what they do.
So, staying on top of thesentiment, on what they're
(31:35):
staying, it is probably moreimportant for us to get that
vibe and yeah, that's areasonable income.
Speaker 1 (31:44):
Yeah.
Speaker 2 (31:45):
Yeah, the DTI, that's an interesting one.
I think it's good if you've gotvarious tools, I.
But it's a funny one becauseyou know that's a tool just like
the, the LVR restrictions as atool and I kind of get the
restrictions of that.
You know, the reason they don'twant a lot of high LVR lending
is because they want the overallNew Zealand mortgage book to be
, that's, sitting at a lowpercentage, because we want to
(32:08):
make sure we're in a really goodposition when something really
really really bad happens.
And I that makes sense, butit's it's it's kind of sad that
that impacts the people that areneeding them the most help, you
know.
So the poor first-home buyersgetting a little bit beat up,
and they're the people thatactually Probably, you know,
needing a bit of help, notneeding another hoop to jump
(32:30):
through.
So it's, it's kind of a bluntinstrument.
All these things are quiteblunt instruments.
Speaker 1 (32:34):
So yes, it makes you have these tools.
Speaker 2 (32:39):
Yeah, I know sometimes the unintended
consequences can be a bit of ashame for some groups.
You know, the reality is ifthey bought the DTI in today,
they probably wouldn't make adifference at all because the
interest rates At a point whereyou can't borrow that much
anyway, so I wouldn't doanything.
So you know, if we go back totwo percent interest rates, yes,
(33:00):
they would definitely have animpact, but if we're down at two
percent interest rates we'veprobably got bigger problems,
right?
Speaker 1 (33:05):
Yeah, and this bag on , that's kind of what we've been
saying is that, yeah, the DTIis essentially wouldn't be
binding initially.
We've seen from the reservebank data that high DTI lending
has come down dramatically,mostly because interest rates
have increased and, as you said,that limits how much you can
borrow compared to your income.
So serviceability haseffectively been doing the job
anyway and I think what youreserve bank gave read between
the lines, I like the way yousaid in terms of just watching
(33:27):
them for the sentiment of whatthey're saying, although the
warning shots they're fine.
I quite like the way you saythat because it is very much
them indicating how they thinkwe should be to ensure financial
stability of our economy.
You know that's ultimately whatthey're doing and I very much
think they'll still bring themin.
But it's not even about thiscycle.
You know, like you said, theywon't be binding.
It's more about what happensnext cycle.
And I think at the same time,if they bring the DTI is in,
(33:49):
loosen the LVRs.
They kind of take with one hand, give with the other and then
they've got both of those toolsto use as leverage in future To
ensure that they're protectingand they talk about one
protection the borrower, oneprotects the bank.
They feel like they got thatcontrol to ensure that I've got,
you know, full understanding ofwhat's going on and that we're
not going to see, like I said,some some financial instability
(34:09):
which could cause broaderproblems to our economy if we
did see some sort of drama downthe road.
So, yeah, really interestingone and certainly much more
information and, you know,communication reserve bank to
follow from the rest of thisyear.
But it's a good little.
Take on that one anyway, butlet's let's move on to the next
slide.
Take on that one anyway, butlet's let's move on the other
(34:30):
thing I want to talk about,steve, was you know the fact
that we're seeing such asignificant swing towards broker
originated mortgages Ratherthan those proprietary bank
origination.
I wonder if you've got anopinion on that as to why that's
happened.
What is it about the broker andmortgage advisor experience
that might be attracting morepeople to to talking to brokers
(34:51):
rather than going direct to ourbank or their bank?
And and do you think that sortof change in trend is here to
stay?
So we're just going to continueto see that those mortgage
advisors Activity just continueto strengthen over the next
couple of years.
Speaker 2 (35:06):
Yeah, I think when I started, I think when I wrote my
first mortgage, I think thebroker share was like 13% and
you know a lot, most people wespoke to didn't know what a
mortgage broker was.
So, yeah, things havedefinitely changed, but sort of
year on year that has been atrend.
So it's nothing new.
(35:26):
But there was a really big jumpwhen COVID happened.
And I think you know, I think,realistically, what it is is
people like to know that they'vegot someone that they can just
jump on the phone to and getadvice.
And you know we give advice.
Is we don't, you know, giveopinion.
(35:49):
That has to be advised, has tobe something we can quantify,
because we have to be able tohang a hat on that advice.
So it's just having access to atrusted person that you can get
that advice from, you know, asopposed to potentially sitting
in a queue to try to talk tosomeone and trying to get a call
back and maybe getting anappointment in a week or
something just to ask a fewquestions.
(36:11):
So I think that's, I thinkthat's a really big piece of it.
So when we needed the mostadvice, which was when the whole
COVID thing first happened,that's when we saw the biggest
jump to the broker share.
But it's been tracking up yearsanyway and we'll probably
continue to do so because at thesame time, you know the banks
models have changed as well.
It's you know you don't have abank on every main street and
(36:33):
you can't just walk in and seesomebody.
It's you know, it's it's quitetransactional there.
You know you've got to make anappointment and you'll see
someone and go back next timeyou might have to see someone
else and start the conversationfrom scratch.
And I think it's just, you know, it's just that change in those
service offerings the brokerservice offering has has
(36:55):
increased.
As you know, with regulatorychanges like we've, we have to
do better as well, which it'sall about getting better
outcomes for the clients.
And I think people just likethat relationship.
You know, my oldest client I'veworked with, not oldest and age
, but in terms of length of timeI've worked with them, is 20
years.
You know, legitimately, I stillwork with them today, 20 years
(37:20):
later, and you know that'sthere's a lot of value in that
relationship and I think that'sone of the really big things.
And you know, and that's beforegetting into the obvious things
like if you know if you go intothe bank you can talk to that
bank and they can talk abouttheir policy and how their
policy would marry into yourposition.
But is that the best policy foryou?
Because we've all got different, unique situations like no
(37:43):
banks the best bank and no banksthe worst bank, because they've
all got different policies andevery bank's policy will suit
someone better.
You know the best bank for mecould be the worst for you, like
because we're different people,and so you know when you're
dealing with a broker, obviouslyyou're dealing with all the
banks in that one person and youcan be on that life journey
(38:04):
with the client as well.
Like the right bank for thatperson today may not be the
right bank for them in five orsix years, because life changes
and policies change and needschange, and so you know you get
to maintain that relationshipthrough your banking life as
well, regardless of what thebank is and I just think there's
a lot of, you know, marketawareness to that sort of thing
(38:25):
as well and you know it'sobviously something that is of
value to the end user being theclient, which is why this year
continues to track up as well,and it's not like we're not
competing with banks like this.
You know banks don't necessarilywant you to not use a broker
and just to come to the bank.
(38:46):
Like it's actually a good modelfor the bank as well, because
you know we bring them theclient, the right client, that
meets their policy the best, andyou know we make that
introduction and you know, andthat works really well for the
banks.
It means they know theiroverheads are significantly
reduced as well because they'renot having to pay people
necessarily, like they'd onlypay a broker once we've
(39:06):
delivered something to them.
They don't pay us for doingnothing.
So you know there's I thinkit's you know it's a win-win.
Like we work well with thebanks, banks work well with us.
Back when I first started, likewe're almost in competition,
we're trying to.
So the banks are trying to takeour clients, we're trying to
take theirs.
I think the industry hasmatured a hell of a lot and
(39:26):
people are quite aware of thatvalue proposition now as well
with the broker, and they'lljust continue to grow.
I believe you know the shareseven higher in Australia it has
been the whole time I've been abroker.
But you know theirs hascontinued to track up, ours has
tracked up as well and we kindof look at the share in Aussie
and think, oh, that's probablywhere we'll be in the next five,
six years, sort of thing.
And we've continued to, youknow, track along nicely with
(39:49):
them.
So it's yeah, will it last?
Yeah, I think not only will itlast, I think we'll just see it
continue to increase.
Speaker 1 (39:56):
Actually, yeah, no, I mean, that's just so
interesting and there's so many,I think, interesting little
tidbits that you mentioned thereright that you are genuinely
giving advice, and that's whatpeople actually want and need
and that's why they go to abroker.
It's that knowledge of you knowwhich banks went so to who,
when and why, and I think that'ssuch a crucial thing and it
(40:16):
does feel like it's trulyindependent advice.
And that's then it's about howyou establish that trust so that
people can can truly believethat too, that they know that
even though, yes, of course,there's something in it for the
broker that they do a lot ofwork upfront and the banks must
benefit from, like, say you,having to take them on that
knowledge journey right toeducate them to understand all
(40:37):
the processes and things theyhave to do and serviceability
and expenses and all thosedifferent things which, like you
said, you take that off thebank's hands.
So definitely makes sense thatthis is a complementary
relationship and it makes senseas to why it's got to where it
is.
So, yeah, brilliant to hearyour experience on that one,
because I think that's reallyreally interesting insight.
So we'll get close to wrappingup, mate, but I just wondered,
(40:59):
you know.
Based on that, then, how do you,maybe how do you establish that
trust?
What sort of your tip if youwere taking on a new broker in
your firm or something like that?
What are some of the things youtalk to them about to help them
establish that trust and tohelp them become a successful
broker?
And how are they negotiating?
Maybe the biggest challengesthat you face as a, as a, as an
(41:21):
industry, as well as a broker,is to you know what, how you're
dealing with those challengesthat exist within that, that
finance space as well, dealingwith regulations and banks and
in all those things like what'syour kind of summation of how to
be a successful guy?
Cross-persons, that You're aquestion.
Speaker 2 (41:38):
Yeah, I think you've got to be quite relatable.
I think it's really important.
You know it's not for everyone.
Just, I mean no roles foreveryone, right, and if it was
easy, everyone do it, I guess.
But if you're not veryrelatable, then that's going to
be difficult.
So, you know, when you speak tosomeone for the first time, I
(42:03):
guess they've got to enjoytalking to you Like you've got
to be able to start adding valuereally quickly to them.
And it doesn't have to bemassive sums of value right up
front, but it's just, you'vejust got to sound like you know
you're talking their language,you understand what their needs
are and you're happy to go onthat journey with them.
And it doesn't take long duringa really quick conversation to
(42:28):
see if, hey, this one mightactually be quite
straightforward or this one'sactually going to be a bit
clunky for these differentreasons, and just being able to
just have really honestconversations with people and
say, hey, look, we've got a fewthings here.
These may become issues.
We might be able to deal withthem quite quickly and easily.
We might not.
I just want to flag youstraight away that this could be
(42:49):
an issue.
So this is something I'm goingto look a little bit closer at
for you.
I think people reallyappreciate that and so, rather
than just thinking, you need tosay what they want to hear,
because you know if something'sgoing to be an issue, it's going
to be an issue.
So if you can just be reallyopen about that and let them
know they have potential issue,I think we can manage it.
I just want to let you know,just so there's no surprises.
(43:11):
You know those sorts of thingsand being relatable because if
you're not relatable, thennothing you say is going to help
that relationship anyway.
And I have seen a lot of peoplewho are very, very technically
good lenders just not be able tooperate in that broker space.
You've got to be able to havesome really difficult
conversations at times too.
You know it's not that nicewhen you've got a burst of
(43:33):
someone's bubble.
So, because it's great givinggood news, it's always a bit
harder giving bad news, but youknow that is what it is, but
you've got to have a lot ofconfidence around that.
So I think I think that's whatit really really comes down to.
If you're relatable, then that'sa really, really big advantage.
(43:54):
You could probably be, to behonest, you could be less
skilled technically, right, yeah, you'll do better.
Yeah, if you're highly, highlyskilled but not relatable, I
mean it's just not going to workfor you.
Because the truth is most ofour businesses happy, happy
customers referring friends,family, work colleagues, et
cetera.
So most of our businesses aregoing to come from some form of
(44:15):
referral.
And so I guess if, if you'regood, just by default you just
get more business.
If you, if you struggle, if youknow, if you're socially
awkward, it doesn't reallymatter how clever you are
getting those referrals.
There's always going to be achallenge.
Speaker 1 (44:34):
Yeah it's a, it's a, it's a service industry, right,
and so it is about thoserelationships and, like you said
, someone that's relatable andthat they can talk to people and
as in the community, right, Ithink that's why you see
mortgage broker firms, some realestate agents, right, they're
really involved in the community, to create connections, to know
people, to be relatable, to befront and center, and that's
(44:55):
where you start conversationsand then, like you said, the
good work does, the does thehard work from there on.
So it all.
It also lines up, I guess.
But so you know, I like the wayyou've termed that.
Relatability certainly seems tobe the word for you.
All, right, mate?
Well, we probably should.
Should wrap up and get on withthe rest of our days.
Is there anything else on yourmind that we might not have
spoken about today?
(45:15):
Any final words, any othermassive predictions?
You want to chuck a crystalball out and tell us what you
expect to happen over the nextone, two, 10, 20 years?
Anything else you haven'ttouched on, mate?
Speaker 2 (45:26):
Hmm, I, before COVID came along, I often used to say
to people because you know, theyhad a lot of concerns and
things I'd say, hey, don't worryabout it, I've seen it all,
it's going to be all right.
And then this whole COVID thingcame along and I was like, oh,
I thought I'd seen it all Turnedout I hadn't.
So I don't say that anymore.
So whenever I'm talking aboutwhat I think is going to happen,
(45:47):
I've got this big caveat.
Now it's like, you know, unlessyou know, because something
good happened tomorrow thatderails all of this.
But you know, the propertymarket is, it is reasonably
cyclical, it is.
You know, there's a lot oflittle things that go on, but
there's, you know, there aremain drivers, not that I'm
(46:09):
teaching you, because youalready know it right.
So, but there are main drivers.
You know, if people feel safein their employment, that's
positive.
If there's more people arrivingthan there are leaving, that's
positive.
You know, if access to money isreasonable, well, that's
positive.
So you know, you start to seethese things build and then the
(46:29):
pressures are building.
So if everything's lookingreally positive, which is going
to start to build up pressurewithin the market, but we're not
building as many houses as wewere.
Then you fast forward, youstart to see, start seeing a bit
of an issue.
You know that's going to driveup values again, so it's an
interesting one.
(46:49):
And we were getting so manyconsents through for new builds
and that's all you know.
A lot of that's fallen away.
A lot of the stuff that'sconsented is not going to get
built anyway because theprojects that maybe were
feasible are no longer feasibleor they might become feasible
again in five or six years.
You know it says if you justlook at the consent numbers
that's not accurate anyway.
But because we know a lot of itwon't get built, but for the on
(47:13):
the development side, theaccess to funding for those guys
is significantly reduced, likesignificantly.
So we know that we will thenget.
We go into this period of notbuilding enough houses again.
And then at the same time weknow we've got good immigration,
we know we've got goodemployment, you know, and as
long as the economy can be in areasonable position and whatever
(47:37):
government we've got at the dayis, you know is is giving the
wider community confidence andthe countries heading in the
right direction.
All these, those pressures justbuild into the obvious.
So, yeah, where do I thinkwe're going from here today?
Well, I guess you know, barringsomething really unusual in the
Reserve Bank having to do a 180or not everything they're doing
(47:59):
, you know.
You know, if everythingremaining equal, I think we'll
start.
We'll just see a slowly, asinflation comes under control
and interest rates are comingdown a little bit.
That's actually going to easeup some of the tensions around
borrowing and as the psychologywe've already seen it changing
and that continues to change andthere's going to be more and
(48:19):
more people actually wanting toget into the market,
particularly as lending policyand access to money eases, we
start to just see the obvioushappening.
If investors start to get alittle bit more into the market,
that's obviously going to helpspeed that up.
I think they would be good ifthey did, because we probably
that would probably ease thepressure on rents.
(48:40):
There's no way they're going todrop just because National said
they're going to reverse thetax deduction of interest costs.
But that, you know, having moreinvestors coming into the
market will definitely ease thepressure on increasing rent.
So you know that would.
I thought I'd argue that's agood thing.
So, yeah, I think from here, Iguess you know.
To sum it up, I think it's morepositive than negative.
(49:00):
If I was a first time buyerthinking, should I buy now?
Hey, I think if you can get amortgage now, you should,
because I think in a couple ofyears you'd look back and go,
damn, that was a good idea andmy interest rate's gone down.
So you know, I think that's, Ithink that'd be pretty smart.
So I think there's there's alot of positives, but the wheels
turn slowly.
You know we always want thingsto happen straight away, but the
wheels turn really slowly.
(49:20):
But I think things will slowlyimprove after coming off the
back of things slowly gettingworse, you know, yeah.
Speaker 1 (49:28):
No, well said, mate.
I think you might be comingfrom my job, not my.
I don't really have anything toadd to that one.
So you know, if you've donewith mortgage-broken, maybe
there's a role in the CoreLogicResearch Team for you, because
you've summed it up nicely there.
One more prediction I need fromyou, then, and that is the
Rugby World Cup kicks off injust over a week.
Will we all next win the WorldCup?
Speaker 2 (49:47):
Oh Jesus, well, if you'd asked me that a week ago,
see you, hey, I hope so.
Speaker 1 (50:00):
Yeah.
Speaker 2 (50:01):
You know, when the country feels good, that's
always helpful.
So, god, I don't know.
I know there's a bit concerningright.
That last game was not thateasy to watch.
So you know, before that I wasfeeling really, really positive.
After that I was feeling lesssure.
But we'll put a positive spinon it and say, well, it's really
(50:21):
good that that happened beforethe World Cup.
It's now been going oh, andthose wrinkles out and things
will just get better from here,just like the property in
mortgage markets.
Speaker 1 (50:29):
I like it, mate.
Yeah, I think it certainlyfeels like one of the more open
World Cups which you know.
I don't know if it's a goodthing or bad thing for the All
Blacks, but there's certainlysome tough teams on their side
of the draw.
So, as you say, we'll wait andsee and I'm sure we'll be able
to get that first game againstFrance too, so we'll see.
Speaker 2 (50:44):
Oh, there'll be some nervous watching, no doubt.
Speaker 1 (50:47):
Okay, mate.
Well, let's close this outproperly.
Just wanted to see if there'sany way that people can get in
touch.
Did you want to drop any socialmedia or anything else you
wanted to promote for ourlisteners?
Speaker 2 (50:57):
Yeah, look, I'm definitely not hard to get hold
of and we can put some linksinto your show nights.
That's easy as socials or just,you know, directly through my
website and things.
And look, I'd encourage anyonewho's curious or interested to
at least get in touch in someway, shape or form, even if it's
just to get your hands on somee-books.
(51:19):
That could be of help.
Just get on the monthlynewsletter that's full of always
good current content.
But even just to have a look at, hey, what could my options be
right now?
Because often I meet so manypeople who would say, hey, look,
I don't think I'm ready to buyright now, but it'd be good to
(51:40):
see where we're at.
And then we discover, actuallyyou can buy right now.
But you know, often it is thecase where, say, hey, you guys
are quite close, we just got totidy this area up and then we'll
get you sorted.
But so it's good to just start.
You know we can work with aclient for six weeks, six months
, you know, two years, whateverit takes to get them across the
(52:01):
line.
So that's fine.
So you shouldn't ever hesitateto reach out and do that, and we
, most of what we do now can bedone digitally as well, so it's
really easy.
You don't have to have a brokersitting in your lounge at 9
o'clock at night these days, soI would encourage anyone to
reach out.
So you have a look in the shownotes and, yeah, get in touch.
That's superb.
(52:22):
Just start the conversation.
Speaker 1 (52:23):
I like it.
Speaker 2 (52:24):
Yeah, outstanding.
Speaker 1 (52:26):
Outstanding.
I think that's a better, bettersay goodbye.
So thank you very much for yourtime.
I really appreciate you takingit to have a good chat to us
about what's going on and someplenty of good thoughts on there
too, so really do appreciatethat.
I just need to say thanks verymuch for listening.
Please do get in touch with anyquestions or thoughts for
future podcasts or even futureguests as well.
Let us know if there's someoneyou think we should include on
the podcast.
My details are all in the show.
(52:47):
The notes of your podcast planwill certainly include some of
Steve's as well, so please letme say thanks again.
My name is Nick.
He's Steve from Low MarketAuckland.
You've been listening to theNew Zealand Property Market
Podcast.
I'm Nick.
Kia ora and welcome to a special guest edition of
the New Zealand Property Marketpodcast brought to you by
CoreLogic, produced by Agents TV.
I'm Nick Goodall, head ofResearch at CoreLogic, and today
I am joined by Steve McMenamey,and he is the director and
mortgage advisor for Loan Market, based out of the west of
Auckland, in Massey, I believe.
Is that right, steve?
Speaker 2 (00:35):
North West Auckland.
We're on the top of the northwest shopping mall, down at the
bottom of the north westernmotorway.
There.
Speaker 1 (00:42):
Nice mate, and how are things going out there?
Speaker 2 (00:44):
Very good yep, it's a pretty dynamic market right now
actually, which might surprisesome people, but yeah, it's a
good area to be in and it's apretty good market to be in
right now.
Speaker 1 (00:55):
Yeah, cool, nice newish area too, isn't it?
In terms of the developmentsaround that area and lots of
fresh homes going up, I suppose,in the last few years, which
must make it a nice area to bepart of.
Speaker 2 (01:05):
Yeah, yes, a huge area in terms of planned growth,
I think, probably one of thebiggest sort of planned
developments in the countryactually.
So, yeah, there's a lot goingon.
Speaker 1 (01:14):
Yeah now, I find it a really interesting one and a
cool area to visit.
But look, we'll get into thedetails about your local market,
and a bit of the broader stuffas well, shortly.
But before we get fully into it, I thought it'd be nice to just
tell us a bit more aboutyourself how long you've been an
advisor for do you have afamily we just said beforehand
that you've got a child at hometoday and what do you do to keep
(01:36):
yourself busy and entertainedoutside of work?
So give us a bit of an intro toSteve mate.
Speaker 2 (01:41):
Wow, oh man, how long have you got?
This is my favourite topic.
So, look, yeah, married kids.
That keeps me fairly busy, asyou can imagine, in terms of
work.
Look, I've been around thefinance industry for actually
for 20 years.
(02:02):
It's been a long time, you know.
I've seen a lot of changes.
I've sort of always been in themortgage-broken space, but I
have taken some time out of theindustry over the years and sort
of explored sort of relatedareas as well, which has kind of
only really added to, I guess,what I offer.
So, for example, I've donequite a bit of private land
(02:25):
development and new buildconstruction along with my
business partner, like quite afew hundred new builds over the
years.
Also spent time working withwhat used to be called Housing
New Zealand, so it's going onnow.
So I was acquisition managerthere for a while, which was a
(02:45):
really interesting thing to be apart of.
So with my time there withhousing, I was in that area of
sort of seeking out jointventure opportunities to bring
the public and the privatesector together and for joint
venture in full housing outcomesfor social housing.
(03:05):
So that was a reallyinteresting month for me there
too, because that was as theAuckland Unitary Plan was sort
of coming into fruition and wewere sort of using that at the
time to achieve the sort ofdensity that we hadn't achieved
in Auckland before, and so to bepart of that and on that scale,
that scale you can only achievein that organisation here in
New Zealand.
There's no one else anywherenear that size.
So that was really reallyinteresting.
(03:29):
And so when I take what I sortof glean from that role and
glean from my own personalexperience within that sort of
private development, and thenbringing that back into my
finance, it enables us to offera lot more than maybe just the
traditional broker does.
So, yes, the bread and butterof our business is always going
to be residential mortgages, butwe're able to do a lot more on
(03:51):
the commercial side as well.
We have quite an interest anddo quite a bit of work with
development and developmentconstruction in particular.
So very, very different beastthat one, but it's something
that we're all quite skilled atwithin our team as well.
So, yeah, so I guess to sumthat up, right many years within
the industry, but sort of alsosort of branching out to bring
(04:13):
those other skills back into thefinance part.
Speaker 1 (04:16):
Yeah, that's awesome and I love and that broad
experience just gives you such agood perspective on things.
You know you can see it fromthe other side of things when
you're trying to do a deal for anew build for a client,
whatever it might be, andcertainly when you're on that
side of things with thegovernment and kind of order or
say, how's New Zealand as itused to be, you know what an
amazing experience to have thereas well, to have that under
(04:37):
your belt.
So, yeah, no doubt gives yougreat perspective and anyone
that's close to that new buildside of things to us it
fascinates me.
It's obviously a really keypart of the market, one that
we're always trying to get ahandle on, and obviously has
shown some vulnerability too aswe go through this downturn in
the market and a fewliquidations too.
So anyone yeah, massively.
Speaker 2 (04:55):
We see that on every cycle.
Actually, you can almost setyour watch to it, so it's not
surprising, but it's alwaysinteresting.
And it's been a little bitdifferent this time around
because the Unitary Plan openedup so much more opportunity for
it and, as you'll know, thelevel of consenting was huge.
And then there was alsoincentives for buyers to be in
(05:18):
that new build space as opposedto existing.
You know, particularly forinvestors and for first home
buyers, there was advantageswith being in that new build
space, but they offer differentthings to the existing houses in
terms of section size andprivacy and those sorts of
things.
So, you know, there's thesedifferent things pulling people
in different directions there,and it's been really interesting
(05:39):
over the last year to see theas the values of the existing
stocks kind of retreated, theswitch of people going back from
the new builds to the existingstocks being quite an
interesting one as well.
Speaker 1 (05:54):
Yeah, I noticed a little bit of nervousness there
playing part there, right, andwhy.
I'll talk about more about newbuilds shortly.
Yeah, the thing I just want totouch on was you know the
history on loan market andobviously I recently attended
your Trans Tasman Awards Night,which was an amazing couple of
days and some impressive figuresin terms of the awards being
thrown around.
So I wondered if you could justtalk about you know what makes
(06:15):
loan markets such a successfulbusiness, why obviously you're
involved with the group and whatare some of the important
developments in the business yousee as sort of keeping you and
your business ahead of the pack.
Speaker 2 (06:27):
I think there's a couple of really key points for
loan market which is why we'repart of it is one would be the
scale.
So you know it's a businessthat spans New Zealand and
Australia, so it's got a lot ofscale and I guess that gives a
lot of hallmark.
But it's a business that'sheavily invested in and run
(06:51):
extremely well in terms of thetop level of management and you
know both of those points.
You know that filters throughto just better outcomes.
So it's better outcomes for thebrokers and because of the
support that that provides andthat in turn, gives a better
outcome for the clients.
And you can see, if you look atsort of you know, the average
(07:14):
performance of, say, the averageloan market broker compared to
just the industry as a whole, ittends to always be, you know,
notably higher.
And it's a business that'sheavily investing in the future
as well.
So there's, you know there's alot of talk right now about AI,
(07:36):
open banking.
You know what does it all mean?
Does it mean things are goingto change?
Well, you know, probably itdoes, but it's about trying to
be ahead of that curve andthat's, you know, it's kind of
like a bold new world and youneed a bit of horsepower to be
ahead of that curve in, you know, in any meaningful way, I
suppose, and that's somethingthat the loan market brand
(07:58):
offers.
Speaker 1 (08:00):
Yeah, not for sure, and I think it's just that push
towards more digitisation rightand being able to do things
faster and easier and givingthat customer at the end point,
a way better experience and,like I said, any person of any
decent size can enable that tohappen with greater tools,
greater partnerships and allthat sort of stuff too.
So really just to see how itgoes anyway and the future
(08:20):
developments as we move through,as you say, some pretty
exciting times for the bankingand finance industry.
So I like that, mate.
Right then let's get into themarket then, mate.
So I know that any mortgageadvisor worth their weight is
keen to talk about the currentmarket, and what I wanted
especially for you is to talkabout anything that might be
(08:42):
relatively unique for your areaor the type of clients that you
talk to.
I'm sure that you don't justdeal with, you know, northwest
of Auckland, whether you stretchacross the whole of Auckland as
well, but really what you'reexperiencing right now maybe
recent changes as well, acrossdifferent buyer types, different
property types as well, whetheryou sort of get involved in
(09:02):
what's happening around units noapartments or townhouses and
houses and then definitely, ifyou've got any insights on
what's happening with those newboards, just sort of touch them
up before a swing back towardsexisting, but whether that's
going to continue on forever.
So, yeah, give us a sort oftake on the current market and
potentially some you know futurethoughts where the market might
(09:23):
go to as we move through therest of this year.
Speaker 2 (09:26):
Yeah, okay, man, that's a massive subject Because
we've got I guess we've got thecurrent market, but then we've
got the different types ofbuyers right.
So we've got first home buyers,then we'd have, you know, the
second home buyers, or clientswho are trying to sell a house
and buy another one, and then Iguess you'd probably say third
buyer group set would beinvestors, and so, yeah, they're
(09:50):
all very different.
So the first home buyer market,that's a really busy one right
now, for sure.
So there's been a lot, I thinkthere's been a lot of sort of
pent up demand there coming offthe back of beliefs, I guess.
So the psychology and somethingyou know chat about sometimes.
(10:10):
You know when, when, when, ifyou're a first home buyer and
you and all of your friends andeverything you read is
suggesting that interest ratesare going to continue increasing
forever and property values arefalling and the market's going
to crash, then would you go, hey, should we buy a house this
week?
You know, probably not.
So you get a whole lot ofpeople sort of standing on the
sidelines, and if you get enoughpeople standing on the
(10:32):
sidelines, then everyone justdoes the same thing.
So now everyone's on sidelinesand that's what we've
experienced over the last sortof year or so, right, but that
that that belief systems change.
So I think enough peoplebelieve that interest rates have
probably peaked or thereabouts.
You know I'm you know with thereasonable signals out of the
Reserve Bank that that'sprobably the case, unless the
(10:54):
numbers that come through startlooking a little less favorable.
but you know, we're probablythere thereabouts give a take a
little bit for volatility.
And there's I think there'ssome pretty reasonable anecdotal
evidence that would suggestthat property values, you know,
probably did bottom out.
From what I see and it's justfrom what I've seen I would
probably say may for us wasprobably where we saw the bottom
(11:16):
, where we're sitting, and youknow, time will tell.
I suppose sometimes you're await a few months to find out
where the bottom actually was.
And so enough people think, hey, it probably is not going to
get any cheaper.
In fact it might start to costmore.
An interest rates aren't goingto get any worse.
I can afford it now.
This is as bad as it's going toget.
But I can buy a house for maybea couple of grand hundred well,
(11:36):
a couple of hundred grandcheaper than I could have a
couple of years ago.
So all of a sudden it goes fromlooking terrible to looking like
, hey, this is actually a reallygood time to buy and it happens
really quickly, like I meanreally quickly.
So for us it probably happenedin July, but literally all of a
sudden everyone we're talking towanted to buy a house yesterday
.
Where has we had been talkingto people who were sort of
(11:59):
looking and then not looking andthinking and you know, and sort
of dealing with them for sixmonths.
And now we're now all of asudden everyone's buying.
And obviously I talked to a lotof real estate agents and
whatnot and they're allexperiencing the same thing,
like literally a switch got hitand now everyone's keen to buy.
So it's become quite aninteresting time.
(12:19):
Now you know where there'sprobably more people wanting to
buy than there are peopleconsidering selling.
So you know that'll have itsown dynamic.
Speaker 1 (12:29):
Let's get to the first-time buyers.
I've got a question on that.
So you're talking aboutabsolutely the psychology, the
sentiments changed.
We sort of talk about as wellthat you can quantify that worst
case, as you said no propertyvalues like unlike the job,
further interest rates unlikelyto increase too much.
That's all good when it comesto I want to buy, you know I'm
keen, I can't see things gettingworse so I'm going to do it.
(12:49):
How do your conversations goaround people being able to buy,
so that affordability pressure?
You know the difficulty forpeople now to still borrow a
relatively large sum of fundsand a relatively high interest
rates with income that might bedecent but still hard to pass
those serviceability tests.
How are those conversationsgoing for you?
Are you turning many away oryou know, and tied into this,
maybe triple CFA staff aroundexpenses?
Speaker 2 (13:11):
How are those?
Speaker 1 (13:12):
conversations going now around trying to adjust your
expenses to ensure that you cansatisfy the criteria to get a
mortgage.
Speaker 2 (13:18):
Yeah, that's.
That's a really good question,because it is.
It is tight, like everyoneknows that.
So you know, every time theinterest rates go up it means
that every one of us can nowborrow less than we could the
day before because, you know,our incomes probably haven't
increased at the same rate andso and I guess that's part of
what filters through into themarket and has a negative impact
(13:42):
on values and helps, you know,sort of pull that back into line
as well.
So so one of the things is, youknow, people aren't typically
expecting to spend the sameamount of money now.
Anyway, you know, you probably.
You know, buy something todaythat would have cost a couple of
hundred grand more a couple ofyears ago.
So, yeah, the interest rateshigher, but the property prices
or the size mortgage will takeout is going to be lower, which
(14:02):
helps compensate.
Personally, I'd rather pay lessfor a house because you know
the purchase price is permanent,interest rates temporary, you
know, but the reality is is yourservicing is very tight.
Access to finances is reasonablycyclical.
We go through a tighteningphase, we go through a loosening
(14:23):
phase.
We've seen a couple of thingsrecently where things have got a
little bit looser In terms ofthe amount of risk banks are
having to factor into things,because they see where we are as
well.
If you're at the bottom andyou're expecting things to get
bad, then I guess you put a lotof risk in.
If you think things aren't thatbad and things are probably
(14:46):
going to get better, you can getaway with less risk.
So those sorts of tools thatthe banks use as well to try to
keep things as free as they canwithout being irresponsible.
But the reality is people arenot able to borrow as much as
they were previously.
But when we look at the actualcost of the mortgage, they'll be
pretty happy with that.
(15:06):
If someone wants to borrow$750,000, but they can only
borrow $650,000, when you showthem what $750,000 would
actually cost them per week,they just fall over.
So it's not like they don'tstill want that figure once they
realise what it will cost.
And they can probably still getwhat they wanted with this
(15:30):
reduced mortgage anyway, becausethe value is dropped.
So it's a funny one.
So it's not as bad as you mightthink, I guess, as we're coming
to there, when you consider it,what it actually means to
people.
Speaker 1 (15:41):
I guess it's a bit of adjustment of expectations,
right?
Is that?
Yeah, you could get thatproperty and live in that area.
But if you really want to get aproperty and live in that, stop
renting, then adjust yourexpectations.
You can still get into themarket and it doesn't have to be
your free for home straightaway.
So I suppose the ability toadjust those expectations is
really important for afirst-time buyer.
Yeah, it really is.
Speaker 2 (16:04):
And one of the good things now, though, is they've
got a lot more options.
So, you know, it's because it'snice to go.
Oh well, you know we used toget 2.5% interest rates, and,
yeah, that was lovely.
It was never going to last, butit was great.
But the you know, the downsideto that was, when the buyers
went to the auction, there was50 people bidding on the house,
and they got outbid by $200,000.
That's quite, you know, that'ssoul destroying.
(16:26):
So it's like like it's neverperfect, you know.
So, yeah, the interest rateswere lower, they could borrow
more, but the house, like, itwas so hard to buy anything.
Now they've got a lot moreoptions.
Prices are way more reasonable.
Yes, they can borrow less, butthat's okay, because prices
reduced, the interest rates arehigher, but at least they can
(16:46):
get in there and negotiate andactually buy something.
So it's, yeah, I don't knowwhat perfect looks like, but I
don't think I've ever seen it.
Speaker 1 (16:55):
That's a good point.
But, like I say, at least thatdesperation is not quite there
at the moment and that's got tobe a good thing, that you don't
feel like you're being forcedinto a decision really quickly
and that's not good for anyone.
Best home buyer, massivepurchase, massive life decision,
and you feel like you're beingpanicked into it because, like I
say, an auction or something inthis with other people and I
like your point around theoptions too, in terms especially
(17:16):
in Auckland, right, we knowthat it's got the broadest range
and type and value of property,largest city, massive.
You know all different types ofproperties available across the
city and different locations.
I know some people willprobably be pretty wedded to
certain areas.
I have to live on the NorthShore or I have to be in the
East Coast base, whatever itmight be.
But generally if you arewilling to adjust those, you can
(17:36):
have plenty of options outthere.
So that's the manner of beingflexible for that.
And first home buyers that'sreally key.
But look, we can probably talkabout the psychology of first
home buyers forever.
Can you get your thoughts aswell on that investor market and
what conversations look likewhen you're talking to an
investor?
These days obviously have beena recent loosening of the loan
to value ratio restriction, thatthe positive requirement has
come down all very slightly, andthen of course we've got the
(17:58):
consideration for whetherthere's an election or there's a
government change of coursewith the election coming up and
even nationals policyannouncements yesterday around
tax changes which could have aninfluence as well.
So we don't get into all thatdetail, but just your take first
on conversations you're havingwith investors.
Has that psychology changed forthem too?
(18:19):
Are they coming back into themarket?
They can see the floor of themarket and they want to start to
put their money back intohousing, or how those
conversations going for you?
Speaker 2 (18:29):
Yeah, that's been a really interesting one because
it's not been easy to be aproperty investor for the last
few years.
Right, it's only got harder andharder and harder.
And so the recent loosening ofthe LVR restrictions I haven't
really I haven't seen an impactfrom that, because the probably
(18:52):
the bigger issue for propertyinvestors is literally just the
affordability and what thatmeans to them.
So you know, within thatinvestor pool, you know you've
got some people who are verysort of independent.
They've got quite a largeportfolio, they've done it
forever.
You probably call them aprofessional investor and
(19:12):
they're reasonably self-funded.
But the reality is mostproperty investors are mom and
dad type of investors who mightown one or two properties and
that's all they'll ever own.
That's you know.
Most of the investor market ismade up from those people, and
the access to that funding isprobably the biggest issue.
(19:33):
So the affordability, it's gotharder and harder for the
investors.
So there's been some significantchanges.
So one was the amendment to thetriple CFA, which meant we now
had to sort of account for morethings that were kind of
accounted for anyway.
For an example, the rentalincome that was always going to
(19:55):
be shaded back to, you know,let's say 75%, to allow the
other 25% to be used for thingslike insurance and rates and
maintenance, maybe some downtimewhen there's no tenants, but
now we're having to sort ofstill do that.
But then also factor in theactual cost of rates and
insurance is things.
So it's like double dippingthere.
(20:16):
But then a massive blow hasbeen the removal of the being
able to offset the cost of themortgage or the interest cost of
your mortgage as a taxdeduction.
And so what that means in realterms obviously is someone who
probably didn't have a taxableposition at the end of the
financial year because the moneyhad all gone on rates,
(20:39):
insurance, the mortgage that'sthe massive one, you know
improved maintenance, etc.
Like you literally come out theend of the year with no money,
but suddenly now you're in ataxable position, so you've got
no money and a tax bill.
So that's real money coming outof people's pockets.
So so the banks have to accountfor that, and so they've had to
change the calculations that wecan use as well to account for
(21:01):
this other massive tax expense,which and so all of these things
just means your ability toborrow money is just going down,
down, down, down, down, down tothe point where you might get
one house, unless you've got areally strong income, at least
here in Auckland, you'reprobably not going to get
another one, whereas maybe lastcycle there was the ability to
(21:24):
get another one or even twopotentially.
So the access to those funds iswhat's probably hampered that
market more than the LVRrestrictions itself, because the
reality with the LVR, mostinvestors aren't walking around
with a few hundred thousanddollars in their pocket for a
deposit.
They're actually going to useanother asset, probably their
(21:46):
home, that's got equity thatthey've built up over the years
and we're going to leverage offthat.
And so you know whether theyneeded a 20% deposit or a 40%
deposit.
It was probably neither herenor there.
They probably had access tothat in their existing equity
position.
It's just been actually thedebt servicing that's absolutely
killed it.
And the recent you know all fromthe not recent now, but all the
(22:09):
changes that were made underthis current government and in
terms of all the added costs,and then you know, losing that
big tax.
I was going to say incentive,but that's not fair because it's
not an incentive.
That's just sort of normalbusiness practice, isn't it?
Maybe you've got to take onsome debt for your business to
expand, then you can offset thecost of that finance.
(22:31):
But so that's the biggest thingfor them, and so I think you
know for us we've seen verylittle on from the investors
over the last couple of years.
Understandably, investors tendto like older properties that
they can buy and quickly addvalue to and then bring back and
(22:51):
into the rental market, and youdon't get that opportunity with
new builds.
So typically you know if it'snew it is what it is and it's
worth what it's worth on the day, and nothing you do is going to
change that.
So that's kind of lessappealing, even though they
still have the tax advantage.
So I think that there will bequite a few people who are
(23:12):
almost ready to go, who willactually wait just to get a bit
more certainty.
I know National came out withtheir policy was it yesterday?
You know that's what they werewaiting to hear.
But now they're probably goingto want to get a bit of feel for
whether they're actually goingto form a government, and so
they can, because that willactually have some impact for
them, albeit it's going to looklike it's going to be staggered
(23:33):
over a few years, but it isprobably.
For some.
That is the good news they'reprobably waiting for to reenter
the market.
Speaker 1 (23:41):
Yeah, I mean again almost comes down to the
sentiment change.
Right, it's just like a youknow that there's a path forward
here and if they do feelconfident in recent polls
certainly look, look likely fornational to form the government.
So really savvy investors mightlook at that and say better to
get in sooner rather than later.
We accept that they're probablygoing to be better in the
future.
Sentiment could drive crisishigher faster as well, and so
(24:02):
they definitely look to get insooner rather than later.
I think I still have ajournalist yesterday and out of
the point that you know we doexpect debt to income
restrictions to come in nextyear as well, and the Reserve
Bank even if there's a newgovernment, of course Reserve
Bank could do that anyway.
And so again, from aninvestor's perspective, I'm like
man, I better get it now.
If I don't now, then I'll waittill next year.
I might actually not be able tobecause the debt to income
(24:25):
restrictions will actually limitme being able to get a mortgage
.
So that could also cause peopleto bring forward their
purchases.
So, you know, I do think it'san interesting time for those
investors and how much thatsentiment and expectation and
maybe hope in some cases theycan change their behaviour and
bring those that activityfurther forward and they get
into the market sooner, whichyou know, strangely enough, will
then add more activity.
(24:47):
Now, more demand pushes pricesup sooner as well, so it can
always be a self fulfillingthing as well If we do say
enough of that momentum changeto come into it.
So really intriguing one towatch, no doubt about that, and
a couple of months now, lessthan couple of months for the
election, it's going to be avery interesting time as all
these parties play the politicsand you try and read between the
lines and see what's just aboutGrabbing and what's real.
(25:09):
And yeah, certainly certainlyinteresting one, it's for sure.
Speaker 2 (25:12):
Yeah, yeah it is.
The elections are always play abig part in the sentiment, for
sure, even though a lot of whatpeople are sort of waiting for
won't really impact them anyway.
But there just seems to be whathappens around elections.
Speaker 1 (25:28):
Okay, well, other than sort of the biotypes of
that psychology, is thereanything else in terms of maybe
differences you're seeing in themarket or differences you
expect in the market Aroundeither property types, so houses
compared to apartments or flats, if you do deal with those
types of properties and or abovecertain value bands?
So do you see more activitybelow million dollars, for
(25:49):
example, and you're seeing thatthe upper end of the market
struggle, or is there anythingkind of, from your perspective
and your dealings, that you'reseeing that a difference is
across those property types orproperty values at the moment?
Speaker 2 (26:00):
I think the biggest thing for us right is is seeing
Maybe that sub million dollarmarket that was, for you know
just from where we sit and sortof anecdotally, that appeared to
be the one that was, you know,affected the quickest as things
slowed down.
But, you know, on the otherside of the corner it's being
(26:24):
affected quite quickly as thesentiment's turning around,
because I think that's probably,you know, that is the biggest
pool of buyers, being the firsttime buyers, who tend to be sort
of in that sub million dollarmarket and like, as we're
already discussing, withouthaving to compete with the
investors as well.
So if a lot of investors comeback into that market space and
I don't think we'll see them on,you know, typical investor
(26:46):
volumes because it is stillreally difficult for them to get
money, but you know, if we geta few more investors coming into
that space, then it will becomeeven more dynamic.
So that's probably the biggestone for us.
In terms of the apartment space, New Zealand loves houses,
right, and slowly coming aroundto so high density living, it is
(27:06):
becoming more and moreacceptable, I guess, and some
people see it as a lifestylechoice.
You know they'll lock and leaveapartment.
No, no long term moment things.
That sounds quite nice, but onething we do see it, we do see
it quite clearly actually islike if the people are saying,
you know, talking about themarket as a whole or the markets
picking up, what we'd see isthe we tend to see the apartment
(27:29):
market doesn't appear to be, itseems to be, it seems to lag.
So I think a lot of people whoget into apartments did do so
when the markets getting quitetricky and they're missing out
on property and the valuesincreasing and they're kind of
you know, looking at what can Inow get for my budget on this
(27:50):
half falling down house?
That smells funny, it's, youknow.
You start to get quite you knowdown on that and you start
looking at other options.
One option is that you lookfurther out, you know, because
typically the further away fromtown things tend to be a little
bit cheaper.
But another option that somepeople do look at is oh, if I go
closer to town and look at anapartment, what does my
lifestyle look like?
And it can actually start tolook really attractive.
(28:12):
And that's why I think we seethat lag and once that market
picks up, that starts to bequite buoyant and dynamic as
well.
But from what I'm seeing, Idon't do a massive amount within
the apartment space, but I doenough to sort of see what's
happening there and it stillappears to be reasonably quiet.
So you know, apartment livingis your thing.
(28:34):
It's probably a really goodtime right now, to be honest.
Speaker 1 (28:37):
Yeah, I wonder if it's another one to watch for
the future.
We're seeing, obviously, apretty big increase in tourism
and people that are doing shortstay Airbnb.
You can have your apartment onthose sort of sites as well,
which tracks, tracks.
Those tourists, excuse me, andalso international students
coming back to study in NewZealand too.
Obviously they're very keen tolive Close to town, close to
(28:58):
university, don't have cars orwhatever, so happy to be walking
.
So I think, as demand for thatstarts to come in as a tenant to
be ready to go to Best iscertainly start to see the value
stack up where you can getdecent rent and cheaper purchase
price than what you're You'rehaving to pay for a house, and
the numbers might stack up alittle bit better as well.
So, not only from a, like I say,an unoccupied perspective, but
(29:19):
also from the best ofperspective, might start to see
things continue to change asthey move throughout this year
and maybe more so as next yearanyway.
So none of that that's reallyinteresting and good insight
there, and all right, my will.
In terms of outside the currentmarket, other factors to look
for and maybe part of now, yourinteractions you're having on a
regular, regular basis to.
I wonder, like how much yousort of pay attention to
(29:40):
everything that goes on thereserve bank.
We feel like we're kind ofconsistently just waiting on the
next announcement from reservebank, and if it's not the OCR
and the multi-policy statements,there's something else they're
always releasing.
And how much do you followwhat's going on?
The opposite, it's prettyimportant interest rates, which
are dictated by the reserve banklargely.
And do you so just payattention to the OCR or is it
much more than that, that you dosort of keep a track of what's
(30:02):
going on?
You know, down the road here inWellington at one of the
terrorists, yeah, that's.
Speaker 2 (30:09):
Yeah, I mean because you can go down a bit of a
rabbit hole and Get too busytrying to keep up with the
reserve bank that you forget towrite mortgages.
So it's probably more, more ofa high level in terms of
following them.
So, yes, the the OCR issomething that we want to be on
top of so that we can Get a feelfor where that's at, because
(30:29):
we're having those conversationsdaily with people who sort of
want our take on things.
But, as well as the OCR, Ithink it's listening to the
message.
You know what's the messagethey're giving out.
You know, is it a, is it awarning shot?
Because they're quite good atsaying things as a warning shot.
You know the debt to income, Imean, that's, that's been a
(30:52):
warning shot for months andmonths and months now, and you
know they'll.
I think it's a tool thatthey'll definitely use when they
feel they need to use it, butit's, I think it's been used as
a more of a warning shot Upuntil today, and the reality is,
is most banks actually use thedebt to income as a bit of a
guide.
Anyway, it's not like a blackand white tool that they use,
(31:14):
but it is part of theirdecision-making process.
So they kind of do take that onboard and sort of use it behind
the scenes, and I think that'sprobably why the, the reserve
banks, sort of chuck thosethings out there as to, hey, if
we say it and if we threatenthese things, then hopefully the
market will just do it anyway,and now then we won't have to.
You know, I think that's kindof what they do.
So, staying on top of thesentiment, on what they're
(31:35):
staying, it is probably moreimportant for us to get that
vibe and yeah, that's areasonable income.
Speaker 1 (31:44):
Yeah.
Speaker 2 (31:45):
Yeah, the DTI, that's an interesting one.
I think it's good if you've gotvarious tools, I.
But it's a funny one becauseyou know that's a tool just like
the, the LVR restrictions as atool and I kind of get the
restrictions of that.
You know, the reason they don'twant a lot of high LVR lending
is because they want the overallNew Zealand mortgage book to be
, that's, sitting at a lowpercentage, because we want to
(32:08):
make sure we're in a really goodposition when something really
really really bad happens.
And I that makes sense, butit's it's it's kind of sad that
that impacts the people that areneeding them the most help, you
know.
So the poor first-home buyersgetting a little bit beat up,
and they're the people thatactually Probably, you know,
needing a bit of help, notneeding another hoop to jump
(32:30):
through.
So it's, it's kind of a bluntinstrument.
All these things are quiteblunt instruments.
Speaker 1 (32:34):
So yes, it makes you have these tools.
Speaker 2 (32:39):
Yeah, I know sometimes the unintended
consequences can be a bit of ashame for some groups.
You know, the reality is ifthey bought the DTI in today,
they probably wouldn't make adifference at all because the
interest rates At a point whereyou can't borrow that much
anyway, so I wouldn't doanything.
So you know, if we go back totwo percent interest rates, yes,
(33:00):
they would definitely have animpact, but if we're down at two
percent interest rates we'veprobably got bigger problems,
right?
Speaker 1 (33:05):
Yeah, and this bag on , that's kind of what we've been
saying is that, yeah, the DTIis essentially wouldn't be
binding initially.
We've seen from the reservebank data that high DTI lending
has come down dramatically,mostly because interest rates
have increased and, as you said,that limits how much you can
borrow compared to your income.
So serviceability haseffectively been doing the job
anyway and I think what youreserve bank gave read between
the lines, I like the way yousaid in terms of just watching
(33:27):
them for the sentiment of whatthey're saying, although the
warning shots they're fine.
I quite like the way you saythat because it is very much
them indicating how they thinkwe should be to ensure financial
stability of our economy.
You know that's ultimately whatthey're doing and I very much
think they'll still bring themin.
But it's not even about thiscycle.
You know, like you said, theywon't be binding.
It's more about what happensnext cycle.
And I think at the same time,if they bring the DTI is in,
(33:49):
loosen the LVRs.
They kind of take with one hand, give with the other and then
they've got both of those toolsto use as leverage in future To
ensure that they're protectingand they talk about one
protection the borrower, oneprotects the bank.
They feel like they got thatcontrol to ensure that I've got,
you know, full understanding ofwhat's going on and that we're
not going to see, like I said,some some financial instability
(34:09):
which could cause broaderproblems to our economy if we
did see some sort of drama downthe road.
So, yeah, really interestingone and certainly much more
information and, you know,communication reserve bank to
follow from the rest of thisyear.
But it's a good little.
Take on that one anyway, butlet's let's move on to the next
slide.
Take on that one anyway, butlet's let's move on the other
(34:30):
thing I want to talk about,steve, was you know the fact
that we're seeing such asignificant swing towards broker
originated mortgages Ratherthan those proprietary bank
origination.
I wonder if you've got anopinion on that as to why that's
happened.
What is it about the broker andmortgage advisor experience
that might be attracting morepeople to to talking to brokers
(34:51):
rather than going direct to ourbank or their bank?
And and do you think that sortof change in trend is here to
stay?
So we're just going to continueto see that those mortgage
advisors Activity just continueto strengthen over the next
couple of years.
Speaker 2 (35:06):
Yeah, I think when I started, I think when I wrote my
first mortgage, I think thebroker share was like 13% and
you know a lot, most people wespoke to didn't know what a
mortgage broker was.
So, yeah, things havedefinitely changed, but sort of
year on year that has been atrend.
So it's nothing new.
(35:26):
But there was a really big jumpwhen COVID happened.
And I think you know, I think,realistically, what it is is
people like to know that they'vegot someone that they can just
jump on the phone to and getadvice.
And you know we give advice.
Is we don't, you know, giveopinion.
(35:49):
That has to be advised, has tobe something we can quantify,
because we have to be able tohang a hat on that advice.
So it's just having access to atrusted person that you can get
that advice from, you know, asopposed to potentially sitting
in a queue to try to talk tosomeone and trying to get a call
back and maybe getting anappointment in a week or
something just to ask a fewquestions.
(36:11):
So I think that's, I thinkthat's a really big piece of it.
So when we needed the mostadvice, which was when the whole
COVID thing first happened,that's when we saw the biggest
jump to the broker share.
But it's been tracking up yearsanyway and we'll probably
continue to do so because at thesame time, you know the banks
models have changed as well.
It's you know you don't have abank on every main street and
(36:33):
you can't just walk in and seesomebody.
It's you know, it's it's quitetransactional there.
You know you've got to make anappointment and you'll see
someone and go back next timeyou might have to see someone
else and start the conversationfrom scratch.
And I think it's just, you know, it's just that change in those
service offerings the brokerservice offering has has
(36:55):
increased.
As you know, with regulatorychanges like we've, we have to
do better as well, which it'sall about getting better
outcomes for the clients.
And I think people just likethat relationship.
You know, my oldest client I'veworked with, not oldest and age
, but in terms of length of timeI've worked with them, is 20
years.
You know, legitimately, I stillwork with them today, 20 years
(37:20):
later, and you know that'sthere's a lot of value in that
relationship and I think that'sone of the really big things.
And you know, and that's beforegetting into the obvious things
like if you know if you go intothe bank you can talk to that
bank and they can talk abouttheir policy and how their
policy would marry into yourposition.
But is that the best policy foryou?
Because we've all got different, unique situations like no
(37:43):
banks the best bank and no banksthe worst bank, because they've
all got different policies andevery bank's policy will suit
someone better.
You know the best bank for mecould be the worst for you, like
because we're different people,and so you know when you're
dealing with a broker, obviouslyyou're dealing with all the
banks in that one person and youcan be on that life journey
(38:04):
with the client as well.
Like the right bank for thatperson today may not be the
right bank for them in five orsix years, because life changes
and policies change and needschange, and so you know you get
to maintain that relationshipthrough your banking life as
well, regardless of what thebank is and I just think there's
a lot of, you know, marketawareness to that sort of thing
(38:25):
as well and you know it'sobviously something that is of
value to the end user being theclient, which is why this year
continues to track up as well,and it's not like we're not
competing with banks like this.
You know banks don't necessarilywant you to not use a broker
and just to come to the bank.
(38:46):
Like it's actually a good modelfor the bank as well, because
you know we bring them theclient, the right client, that
meets their policy the best, andyou know we make that
introduction and you know, andthat works really well for the
banks.
It means they know theiroverheads are significantly
reduced as well because they'renot having to pay people
necessarily, like they'd onlypay a broker once we've
(39:06):
delivered something to them.
They don't pay us for doingnothing.
So you know there's I thinkit's you know it's a win-win.
Like we work well with thebanks, banks work well with us.
Back when I first started, likewe're almost in competition,
we're trying to.
So the banks are trying to takeour clients, we're trying to
take theirs.
I think the industry hasmatured a hell of a lot and
(39:26):
people are quite aware of thatvalue proposition now as well
with the broker, and they'lljust continue to grow.
I believe you know the shareseven higher in Australia it has
been the whole time I've been abroker.
But you know theirs hascontinued to track up, ours has
tracked up as well and we kindof look at the share in Aussie
and think, oh, that's probablywhere we'll be in the next five,
six years, sort of thing.
And we've continued to, youknow, track along nicely with
(39:49):
them.
So it's yeah, will it last?
Yeah, I think not only will itlast, I think we'll just see it
continue to increase.
Speaker 1 (39:56):
Actually, yeah, no, I mean, that's just so
interesting and there's so many,I think, interesting little
tidbits that you mentioned thereright that you are genuinely
giving advice, and that's whatpeople actually want and need
and that's why they go to abroker.
It's that knowledge of you knowwhich banks went so to who,
when and why, and I think that'ssuch a crucial thing and it
(40:16):
does feel like it's trulyindependent advice.
And that's then it's about howyou establish that trust so that
people can can truly believethat too, that they know that
even though, yes, of course,there's something in it for the
broker that they do a lot ofwork upfront and the banks must
benefit from, like, say you,having to take them on that
knowledge journey right toeducate them to understand all
(40:37):
the processes and things theyhave to do and serviceability
and expenses and all thosedifferent things which, like you
said, you take that off thebank's hands.
So definitely makes sense thatthis is a complementary
relationship and it makes senseas to why it's got to where it
is.
So, yeah, brilliant to hearyour experience on that one,
because I think that's reallyreally interesting insight.
So we'll get close to wrappingup, mate, but I just wondered,
(40:59):
you know.
Based on that, then, how do you,maybe how do you establish that
trust?
What sort of your tip if youwere taking on a new broker in
your firm or something like that?
What are some of the things youtalk to them about to help them
establish that trust and tohelp them become a successful
broker?
And how are they negotiating?
Maybe the biggest challengesthat you face as a, as a, as an
(41:21):
industry, as well as a broker,is to you know what, how you're
dealing with those challengesthat exist within that, that
finance space as well, dealingwith regulations and banks and
in all those things like what'syour kind of summation of how to
be a successful guy?
Cross-persons, that You're aquestion.
Speaker 2 (41:38):
Yeah, I think you've got to be quite relatable.
I think it's really important.
You know it's not for everyone.
Just, I mean no roles foreveryone, right, and if it was
easy, everyone do it, I guess.
But if you're not veryrelatable, then that's going to
be difficult.
So, you know, when you speak tosomeone for the first time, I
(42:03):
guess they've got to enjoytalking to you Like you've got
to be able to start adding valuereally quickly to them.
And it doesn't have to bemassive sums of value right up
front, but it's just, you'vejust got to sound like you know
you're talking their language,you understand what their needs
are and you're happy to go onthat journey with them.
And it doesn't take long duringa really quick conversation to
(42:28):
see if, hey, this one mightactually be quite
straightforward or this one'sactually going to be a bit
clunky for these differentreasons, and just being able to
just have really honestconversations with people and
say, hey, look, we've got a fewthings here.
These may become issues.
We might be able to deal withthem quite quickly and easily.
We might not.
I just want to flag youstraight away that this could be
(42:49):
an issue.
So this is something I'm goingto look a little bit closer at
for you.
I think people reallyappreciate that and so, rather
than just thinking, you need tosay what they want to hear,
because you know if something'sgoing to be an issue, it's going
to be an issue.
So if you can just be reallyopen about that and let them
know they have potential issue,I think we can manage it.
I just want to let you know,just so there's no surprises.
(43:11):
You know those sorts of thingsand being relatable because if
you're not relatable, thennothing you say is going to help
that relationship anyway.
And I have seen a lot of peoplewho are very, very technically
good lenders just not be able tooperate in that broker space.
You've got to be able to havesome really difficult
conversations at times too.
You know it's not that nicewhen you've got a burst of
(43:33):
someone's bubble.
So, because it's great givinggood news, it's always a bit
harder giving bad news, but youknow that is what it is, but
you've got to have a lot ofconfidence around that.
So I think I think that's whatit really really comes down to.
If you're relatable, then that'sa really, really big advantage.
(43:54):
You could probably be, to behonest, you could be less
skilled technically, right, yeah, you'll do better.
Yeah, if you're highly, highlyskilled but not relatable, I
mean it's just not going to workfor you.
Because the truth is most ofour businesses happy, happy
customers referring friends,family, work colleagues, et
cetera.
So most of our businesses aregoing to come from some form of
(44:15):
referral.
And so I guess if, if you'regood, just by default you just
get more business.
If you, if you struggle, if youknow, if you're socially
awkward, it doesn't reallymatter how clever you are
getting those referrals.
There's always going to be achallenge.
Speaker 1 (44:34):
Yeah it's a, it's a, it's a service industry, right,
and so it is about thoserelationships and, like you said
, someone that's relatable andthat they can talk to people and
as in the community, right, Ithink that's why you see
mortgage broker firms, some realestate agents, right, they're
really involved in the community, to create connections, to know
people, to be relatable, to befront and center, and that's
(44:55):
where you start conversationsand then, like you said, the
good work does, the does thehard work from there on.
So it all.
It also lines up, I guess.
But so you know, I like the wayyou've termed that.
Relatability certainly seems tobe the word for you.
All, right, mate?
Well, we probably should.
Should wrap up and get on withthe rest of our days.
Is there anything else on yourmind that we might not have
spoken about today?
(45:15):
Any final words, any othermassive predictions?
You want to chuck a crystalball out and tell us what you
expect to happen over the nextone, two, 10, 20 years?
Anything else you haven'ttouched on, mate?
Speaker 2 (45:26):
Hmm, I, before COVID came along, I often used to say
to people because you know, theyhad a lot of concerns and
things I'd say, hey, don't worryabout it, I've seen it all,
it's going to be all right.
And then this whole COVID thingcame along and I was like, oh,
I thought I'd seen it all Turnedout I hadn't.
So I don't say that anymore.
So whenever I'm talking aboutwhat I think is going to happen,
(45:47):
I've got this big caveat.
Now it's like, you know, unlessyou know, because something
good happened tomorrow thatderails all of this.
But you know, the propertymarket is, it is reasonably
cyclical, it is.
You know, there's a lot oflittle things that go on, but
there's, you know, there aremain drivers, not that I'm
(46:09):
teaching you, because youalready know it right.
So, but there are main drivers.
You know, if people feel safein their employment, that's
positive.
If there's more people arrivingthan there are leaving, that's
positive.
You know, if access to money isreasonable, well, that's
positive.
So you know, you start to seethese things build and then the
(46:29):
pressures are building.
So if everything's lookingreally positive, which is going
to start to build up pressurewithin the market, but we're not
building as many houses as wewere.
Then you fast forward, youstart to see, start seeing a bit
of an issue.
You know that's going to driveup values again, so it's an
interesting one.
(46:49):
And we were getting so manyconsents through for new builds
and that's all you know.
A lot of that's fallen away.
A lot of the stuff that'sconsented is not going to get
built anyway because theprojects that maybe were
feasible are no longer feasibleor they might become feasible
again in five or six years.
You know it says if you justlook at the consent numbers
that's not accurate anyway.
But because we know a lot of itwon't get built, but for the on
(47:13):
the development side, theaccess to funding for those guys
is significantly reduced, likesignificantly.
So we know that we will thenget.
We go into this period of notbuilding enough houses again.
And then at the same time weknow we've got good immigration,
we know we've got goodemployment, you know, and as
long as the economy can be in areasonable position and whatever
(47:37):
government we've got at the dayis, you know is is giving the
wider community confidence andthe countries heading in the
right direction.
All these, those pressures justbuild into the obvious.
So, yeah, where do I thinkwe're going from here today?
Well, I guess you know, barringsomething really unusual in the
Reserve Bank having to do a 180or not everything they're doing
(47:59):
, you know.
You know, if everythingremaining equal, I think we'll
start.
We'll just see a slowly, asinflation comes under control
and interest rates are comingdown a little bit.
That's actually going to easeup some of the tensions around
borrowing and as the psychologywe've already seen it changing
and that continues to change andthere's going to be more and
(48:19):
more people actually wanting toget into the market,
particularly as lending policyand access to money eases, we
start to just see the obvioushappening.
If investors start to get alittle bit more into the market,
that's obviously going to helpspeed that up.
I think they would be good ifthey did, because we probably
that would probably ease thepressure on rents.
(48:40):
There's no way they're going todrop just because National said
they're going to reverse thetax deduction of interest costs.
But that, you know, having moreinvestors coming into the
market will definitely ease thepressure on increasing rent.
So you know that would.
I thought I'd argue that's agood thing.
So, yeah, I think from here, Iguess you know.
To sum it up, I think it's morepositive than negative.
(49:00):
If I was a first time buyerthinking, should I buy now?
Hey, I think if you can get amortgage now, you should,
because I think in a couple ofyears you'd look back and go,
damn, that was a good idea andmy interest rate's gone down.
So you know, I think that's, Ithink that'd be pretty smart.
So I think there's there's alot of positives, but the wheels
turn slowly.
You know we always want thingsto happen straight away, but the
wheels turn really slowly.
(49:20):
But I think things will slowlyimprove after coming off the
back of things slowly gettingworse, you know, yeah.
Speaker 1 (49:28):
No, well said, mate.
I think you might be comingfrom my job, not my.
I don't really have anything toadd to that one.
So you know, if you've donewith mortgage-broken, maybe
there's a role in the CoreLogicResearch Team for you, because
you've summed it up nicely there.
One more prediction I need fromyou, then, and that is the
Rugby World Cup kicks off injust over a week.
Will we all next win the WorldCup?
Speaker 2 (49:47):
Oh Jesus, well, if you'd asked me that a week ago,
see you, hey, I hope so.
Speaker 1 (50:00):
Yeah.
Speaker 2 (50:01):
You know, when the country feels good, that's
always helpful.
So, god, I don't know.
I know there's a bit concerningright.
That last game was not thateasy to watch.
So you know, before that I wasfeeling really, really positive.
After that I was feeling lesssure.
But we'll put a positive spinon it and say, well, it's really
(50:21):
good that that happened beforethe World Cup.
It's now been going oh, andthose wrinkles out and things
will just get better from here,just like the property in
mortgage markets.
Speaker 1 (50:29):
I like it, mate.
Yeah, I think it certainlyfeels like one of the more open
World Cups which you know.
I don't know if it's a goodthing or bad thing for the All
Blacks, but there's certainlysome tough teams on their side
of the draw.
So, as you say, we'll wait andsee and I'm sure we'll be able
to get that first game againstFrance too, so we'll see.
Speaker 2 (50:44):
Oh, there'll be some nervous watching, no doubt.
Speaker 1 (50:47):
Okay, mate.
Well, let's close this outproperly.
Just wanted to see if there'sany way that people can get in
touch.
Did you want to drop any socialmedia or anything else you
wanted to promote for ourlisteners?
Speaker 2 (50:57):
Yeah, look, I'm definitely not hard to get hold
of and we can put some linksinto your show nights.
That's easy as socials or just,you know, directly through my
website and things.
And look, I'd encourage anyonewho's curious or interested to
at least get in touch in someway, shape or form, even if it's
just to get your hands on somee-books.
(51:19):
That could be of help.
Just get on the monthlynewsletter that's full of always
good current content.
But even just to have a look at, hey, what could my options be
right now?
Because often I meet so manypeople who would say, hey, look,
I don't think I'm ready to buyright now, but it'd be good to
(51:40):
see where we're at.
And then we discover, actuallyyou can buy right now.
But you know, often it is thecase where, say, hey, you guys
are quite close, we just got totidy this area up and then we'll
get you sorted.
But so it's good to just start.
You know we can work with aclient for six weeks, six months
, you know, two years, whateverit takes to get them across the
(52:01):
line.
So that's fine.
So you shouldn't ever hesitateto reach out and do that, and we
, most of what we do now can bedone digitally as well, so it's
really easy.
You don't have to have a brokersitting in your lounge at 9
o'clock at night these days, soI would encourage anyone to
reach out.
So you have a look in the shownotes and, yeah, get in touch.
That's superb.
(52:22):
Just start the conversation.
Speaker 1 (52:23):
I like it.
Speaker 2 (52:24):
Yeah, outstanding.
Speaker 1 (52:26):
Outstanding.
I think that's a better, bettersay goodbye.
So thank you very much for yourtime.
I really appreciate you takingit to have a good chat to us
about what's going on and someplenty of good thoughts on there
too, so really do appreciatethat.
I just need to say thanks verymuch for listening.
Please do get in touch with anyquestions or thoughts for
future podcasts or even futureguests as well.
Let us know if there's someoneyou think we should include on
the podcast.
My details are all in the show.
(52:47):
The notes of your podcast planwill certainly include some of
Steve's as well, so please letme say thanks again.
My name is Nick.
He's Steve from Low MarketAuckland.
You've been listening to theNew Zealand Property Market
Podcast.
I'm Nick.
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