Welcome to our first edition newsletter for 2023. Alarmingly it’s somehow March already and the days already are becoming shorter. Summer felt as though it never quite arrived at Advice Knight HQ and certainly did not deliver to one’s usual expectations of generally pleasant, calm, warm picnic conducive conditions of summers gone by.
It’s been despairing seeing the sad stories unfold, first from the flooding events in Auckland/Northland and then by delivered by Cyclone Gabrielle only weeks apart. A number of our clients have been adversely impacted with damage to property and even having homes ‘red stickered’. It was particularly confronting seeing the devastation and destruction in the Hawkes Bay first hand over the last fortnight.
Unfortunately, the economic backdrop has similarly expressed further tails of destruction and key factors like inflation are proving more stubborn than otherwise hoped. This will be further strained by the impacts of the cyclone challenging food production and logistics. Many crops can’t be harvest or sold and will contribute to a further inflation spike in the first half of this year. Food prices have already been running rampant and we’ve all felt the hit in our grocery bills. The cost to infrastructure will likewise be severe and makes important moves like adjustment to tax brackets harder to deliver.
ASB’s Housing Confidence Survey last week and the word ‘Gloomy’ was used to sum it up. It showed house price expectations hit their weakest level since the 2008/09 Global Financial Crises with a net 43% of respondents expecting prices to fall over the next year. We have already seen prices drop around 15% from their peak so the question will be where does that bottom sit. With soft net migration, further impact of fixed rates rolling and repricing and low confidence – I feel another 10% softening is far from off the cards and suspect a further winter drop being quite likely. Will Spring inject life back into the market?