So we’ve come to the end of another calendar year. A year in which the National party were returned to Government with a record victory and the NZ economy stood up very well against all of our trading partners. In fact, overseas commentators referred to ours as a “Rock Star economy”, which bolstered our currency and led to a wave of optimism about prospects for the coming year.
Yet it was a tale of divided fortunes with house prices continuing to soar in Auckland and Christchurch, while the remainder of provincial New Zealand stayed relatively subdued. These increases of values in our major centres has led to a detrimental effect around housing affordability, with mortgage costs as a percentage of income climbing to their highest level for some time. The reserve banks refusal to remove the banks caps on low deposit lending has further restricted any increase in local house sales. However, we have seen banks more prepared to consider over 80% LVR (Loan size to property value ratio) loans as they have had a year to manage their loans since the introduction of RBNZ restrictions, to assess the percentage of borrowing at that level, and in most cases are more comfortable that for the right customers they will be able to remain within the Reserve bank’s target figure. One exception to this is Kiwibank which has recently announced that they are getting too close to the restricted level and have pulled back to maintain their over 80% loan portfolio at an acceptable level.
Data from one bank recently stated that a lot of NZ households have used this year to try and reduce their debt levels, and the continued low interest rates have certainly helped with repayments. Looking forward, most economists suggest that interest rates will remain at their current level up until the end of 2015 with any increases in rates being introduced at a slow pace. This will certainly help those who currently have mortgages and those who may be thinking about purchasing property in the coming months.
The main focus for many insurers over the past year has been a review of their health cover products. New Zealand’s largest insurer Sovereign completely revamped its health product to compete with NIB and Accuro’s cheaper priced options, which have all attacked Southern Cross which has traditionally been the major provider of private healthcare insurance in NZ. Certainly the need for some type of private health cover has been well documented and in a report last month in the New Zealand Herald it was stated that,
“ Statistics New Zealand projects the population aged 65 and over to grow to over 1,000,000 by 2031. By 2051, around 1.18 million people are expected to be aged 65 and over in New Zealand. The consequential pressure on health services will be profound unless we change the way we deliver care.”
The remainder of the predictions for 2015 as is often the case in New Zealand, are very much reliant on outside influences. Economic decisions in the U.S. and China will have a major impact on our export economy and we’ll be hoping that the drop in Dairy pay-outs doesn’t continue into a second year for our farmers. The general economic outlook for NZ suggests that things are going to go along in much the same way as they have over the past 12 months with no major changes to affect everyday life. The advice given by an economist earlier in the year seems the best for now. “Just keep doing what you’re doing and everything will be fine.”
As this is our last article of the year, O’Hagan Home Loans and Insurance would like to take the opportunity to wish all our clients and readers a very happy (And hopefully prosperous) New Year!
