Market Update.
Keeping you up-to-date with market changes.

1. Interest rates
   The Reserve Bank cut the official cash rate 0.75% in March and since then floating mortgage rates have fallen to near 4.5% from 5.3%. The two-year fixed rate has fallen to 2.65% from 3.55%. Term deposit rates have also fallen, with the six-month rate going to 1.3% from 2.3%. Lower interest rates have made purchasing a home more affordable, and encouraged investors seeking higher yield than now offered in bank term deposits, to look at other assets including property.
2. Interest rate expectations
   It is not just that interest rates are low. The Reserve Bank have made it clear that they intend to keep rates low for many years, with assistance from the US Federal Reserve, which has just shifted their policy stance toward multiple years of low rates to try and generate inflation above 2% for a number of years. Also, our central bank has indicated it may introduce a negative official cash rate next year.
   Expectations that interest rates will stay low are encouraging people to expect that other people in the future will be seeking higher yielding assets including property. So, they are buying before this expected extra demand comes along.
3. Migration boom
   Even before we had heard of Covid-19, from the middle of last year a change was occurring in the net flow of Kiwis across our borders from negative to positive 2,800 come the end of 2019. By March this year the net Kiwi flow was +13,000, contributing to a record net inflow for all countries of 90,000 from 50,000 a year earlier.
   We already have in the country the net migration gain we expected would be recorded by just after the middle of 2021. This means extra pressure on rental accommodation, allowing investors to (now) raise rents, whilst discouraging them from selling and encouraging more purchasing.
4. Migration expectations
   Most Kiwis expect that when the borders reopen, we will see a great number of our expats coming home – along with many foreigners wanting to shift here. Expectations of a coming horde which will purchase property is encouraging extra purchasing now – especially with people swapping stories of expats buying property unseen whilst still offshore. The numbers doing so are however probably very low.

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Our clients have said they are:

• • 1. Stressed about their financial circumstances.
    2. Concerned around potential changes in their personal health.
    3. Uncertain if their existing insurance fits their current needs, or anxious because they’re financially exposed with no cover.

    Don’t suppose any of these are an issue for you? Part of looking after you is to make sure your lending commitments can be supported in the event your circumstances change. Jaime and the SuperCity Insurance team have been busy helping clients with financial modelling.

  • Clients are often telling us they have more clarity on where they’re at right now because the team can show them a visual snapshot of their world over Zoom. The team model out scenarios that might be a concern for clients, such as ‘what if my income drops?’, and explore ways to help reduce debt and work on building and protecting their lifetime cashflows. Check out their Financial Modelling Demo. If you would like some help, please contact Jaime directly.

Jaime James
Managing Director, Principle Insurance Adviser
M 021 527 069
E jaime@supercityinsurance.co.nz
Level 26, PwC Tower, 188 Quay Street, Auckland 1010