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Reliance Newsletter April 2019

Reliance Newsletter April 2019

We help people live better, longer and healthier lives


Current discounted Interest Rates* on 24th  April 2019


Variable                      4.69%

6 Month Fixed              3.99%
1 Year Fixed                3.95%
2 Year Fixed                3.95%
3 Year Fixed                3.95%

4 Years Fixed               4.35%
5 Year Fixed                4.45%
These are not published rates of any bank. But for good sized lending of over 1 million dollars and low Loan to Value Ratio(LVR), Reliance Financial Group may get* these rates or even better depending on loan size.  

*Conditions apply


Weak Economic Outlook for New Zealand     

The latest NZIER Quarterly Survey of Business Opinion has backed up the results of the ANZ’s latest business outlook survey showing New Zealand businesses to be very downbeat about their prospects. The New Zealand dollar dipped again on the news, falling from US68.05c to US67.85c immediately after the NZIER survey was released at 10am on Tuesday.

ASB economists immediately responded to the survey results by picking that the RBNZ would cut the Official Cash Rate in May. They've brought forward the expected timing of that move from a previous forecast of August and they say the survey results point to first quarter GDP growth this year of just 0.4% against a previous forecast of 0.8% from the RBNZ.

ASB senior economist Jane Turner said the results of the NZIER survey were weaker than expected. 

"Businesses reported that activity over Q1 was weaker than over Q4, and this indicator is consistent with quarterly GDP growth of just 0.4%. 

"Business confidence measures were also bleak, with expectations for activity to improve over the next 3 months plunging to the lowest levels since the Canterbury earthquakes in 2010 and early 2011.

"Businesses continue to report a decline in profitability, with cost pressures outstripping selling prices.  While firms continue to state their intentions to lift prices, inevitably a smaller share of firms seem to be able to subsequently lift selling prices in the next quarter. 



Economists see OCR  down to 0.75% next year   

As per  Kiwibank's Our Take publication,   their chief economist is  confident that  interest rates will fall further and remain at or below historic lows for a very, very long time  They forecast two OCR cuts this year, starting in May, which would take the OCR down to 1.25% from its current 1.75% and further they put a 40% chance of another 50bp cut in the OCR to 075%.  

On the Kiwi dollar they forecast with interest rate going down, a downward movement of kiwi dollar to low 0.60s by year end is imminent.

You might have seen it has already gone down in 66s from 68s a few days back.

They even go to the extent that threats of recession offshore, could see the bird (kiwi dollar) drop into the US50s.

In explaining the current economic backdrop, they have three arguments.

"The first, is the lack of confidence. Firms remain wary of the outlook. A lack of business confidence may disrupt hiring and investment decisions. But probably with CGT gone now, business confidence may slightly bounce back.

"The second, is the Australian property market.

 The housing market is tumbling (mainly in Sydney, Melbourne and Perth). The sharp decline in Australian house prices is thought to represent a yellow canary down the coalmine for Kiwi housing. We disagree. 

"The third, is the rise of populism and protectionism. We wait with bated breath on the outcome of US-China trade negotiations and Brexit.

A deteriorating global outlook can quickly impact New Zealand. We don’t have to look too far for evidence. Kiwi Businesses are worried about their own outlook for activity, and profitability. The economic woes offshore are weighing on Kiwi confidence. And a lack of confidence can quickly lead to a lack of growth.


Buying home  in Auckland getting easy for First Home Buyers 

The ongoing decline in mortgage interest rates means the Auckland region is now within a hair’s breadth of being considered affordable for first home buyers, despite the region’s lower quartile dwelling price sitting at a record high.

In the first quarter of 2019, first home buyers (FHBs) and mortgaged multiple property owners (investors) each accounted for 24% of property purchases. For a long period of time, investors had a much larger market share, but LVR III (40% deposit) dampened their activity from October 2016 and meanwhile FHBs have slowly and surely kept raising their presence. This is not to say that there is always direct competition between the two groups, or that an investor buying is always locking out a FHB (or vice versa). But it’s still interesting that their market shares are similar and these may well continue to be the two groups to watch for the rest of 2019.

In March 2017 when Auckland’s lower quartile price first hit $680,000, the average of the two-year fixed rate was 4.8%. This meant the mortgage payments on a lower quartile-priced home would have been equivalent to $733.84 a week.

But the mortgage payments on a home purchased for the same price in March this year would have been $666.45 a week, a reduction of $67.39.

Over the same period, interest.co.nz estimates the median take home pay for an Auckland couple where both were aged 25-29 and working full time (the standard model used in the Home Loan Affordability Reports’ first home buyer calculations), would have increased from $1597.12 a week to $1663.29.

The combined effect of lower interest rates and higher take home pay means the amount of their weekly income a typical first home buying couple would need to set aside for the mortgage payments on a lower quartile-priced home dropped from 45.95% in March 2017 to  40.07% in March this year, with payments of 40% or less considered affordable.

That means that Auckland is on the cusp of once again being considered affordable for typical first home buyers, and large parts of the city already are.


Ring fencing of losses on rental properties to stop

Yes, the CGT is gone, but the Government is still committed to ring fencing tax losses on investment properties, which is arguably even more damaging to investors since it affects their annual cashflow. The legislation formalising this has yet to become law, but Finance Minister Grant Robertson has made it clear that it will be backdated, so expect it to apply to the 2019-20 tax year and beyond.

At present, people who own investment properties which lose money — because the rental income is less than expenses such as mortgage interest payments, rates and property repairs — can offset that loss against their other sources of income, such as wages or income from a business.

This lowers an investor's overall taxable income and, consequently, their tax bill.

The Government wants to end the tax breaks because it believes they unfairly help speculators and wealthy investors who outbid first-home buyers.

Under the planned law change expected to be implemented effective 1st April, any losses on an investment property could no longer be used to offset other income.

Instead, losses could only be carried forward to reduce property income in future years, if the property in question begins to produce a profit, or in some cases to offset tax on the sale of a property.


 House sale numbers decline  

The number of residential properties sold in March fell by 12.9% from the same time last year to 6,938 (down from 7,964) according to the latest data from the Real Estate Institute of New Zealand (REINZ).

Sales volumes in Auckland were down 18.2% from the same time last year, with all areas except Waitakere City, seeing a fall in volumes year-on-year. Despite, the large fall in volumes, this was the highest number of properties sold in the City of Sails for four months.

 The last time sales volumes fell this much on an annual basis was 17 months ago. For New Zealand excluding Auckland, the number of properties sold fell by 10.5% when compared to the same time last year (from 5,513 to 4,932). It is interesting to note as well that the number of city suburbs with median values above $1m had jumped from 13.8 per cent in February 2014 to almost half (48 per cent) as of last month.

Looking at the Auckland picture, the median price has just continued to hover around the $850,000 mark – the same thing we’ve seen for nearly three years now suggesting that perhaps the Auckland market has found its ‘new normal’ for the time being.


Ten percent discount on insurance premium forever 

  Two of major insurance companies are providing 10% discount on life and other related insurance covers like trauma. Good part is that the discount will be available for life of the policy which will save you in thousands over the period of the policy. These offers are for a limited time. For instance, if your monthly premium comes 100 dollars you save 10 dollars every month. As premiums keep increasing with age, your savings will keep on increasing.

Call us or email us to find out more details and grab these opportunities to save on your insurance premiums. 

Posted Date

27 Apr 2019

Reliance Newsletter May 2019

Reliance Newsletter May 2019


Current discounted Interest Rates* as on 17th May 2019

Variable                      4.69%
6 Month Fixed              4.05%
1 Year Fixed                3.89%
2 Year Fixed                3.89%
3 Year Fixed                3.89%

4 Years Fixed               4.29%
5 Year Fixed                4.39%

These are not published rates of any bank. But for good sized lending of over one million dollars and low Loan to Value Ratio (LVR), Reliance Financial Group may get* these rates or even better depending on loan size. 

*Conditions apply


After effects of OCR (Official Cash Rate) cut

The Reserve Bank has cut the Official Cash Rate to 1.5% from 1.75% on 8th of May 2019. The OCR was last changed in November 2016.

Banks were very quick to reduce their mortgage and deposit rates. Kiwi dolalr fell from 66 US cents to almost 65 US cents. 

Some economists’ current forecast is that the RBNZ will keep the OCR on hold at 1.5% until mid-2020, when it will reduce the OCR again. Some others forecast another cut in November and a third one in February 2020 bringing down the Official cash rate9OCR) to 1.25%.

The key message for financial markets is interest rates will likely fall further and hold in an even lower for longer range. Kiwi dollar is also expected to have volatility and continue to decline.


Housing Market - Sales decline but not prices

 As per Real Estate Institute of New Zealand figures, April was a quiet month for the real estate industry with the number of homes sold nationwide down 11.5% compared to April last year.

It was the lowest number of homes sold in the month of April for five years.

Prices though were relatively static, with the national median price of $585,000 in April unchanged from March, but up 6.4% compared to April last year.

Sales were even weaker in the critical Auckland market where 1608 properties were sold in April, down 16.3% from April last year, and an 11 year low for the month of April.

For the rest of the country excluding Auckland, sales volumes were down 9.5% compared to April last year.

Other regions with significant declines in sales year-on-year were Bay of Plenty down25.5%, which was a five year low for the month, Nelson down 16.7%, Marlborough down 14% and Southland down 14%.

In the Wellington region sales were down 11.9%, in Canterbury sales were down 11.8%, and in Otago sales were down 11.5%. 


Strong Growth in migration

Figures for year ended March 2019, show a net loss of 10,001 New Zealand citizens during that period and a net gain of 66,138 citizens of other countries.

The biggest source country for long-term arrivals was China with a net gain 10,060 in the 12 months to March.

That was followed by a net gain of 9144 from India, which was down 2.9% compared to a year ago, South Africa 7343 (+36.7%), and the Philippines 6393 (-20.5%).

By visa type, the biggest group of arrivals were 45,124 New Zealand and Australian citizens (who do not require visas), which was up 4.1% on the previous 12 months.

The next biggest group were people arriving on work visas, 33,260 (+10.3%), 32,289 visitor visas (+21.7%), 26,037 student visas (+3.9%) and 14,159 residency visas (-6.8%).


Westpac predicts house price boom & no OCR cuts

Westpac economists believe this month's Official Cash Rate cut could boost house prices by 7%, but they do not expect further cuts to follow. 

Westpac economists previously predicted the Reserve Bank would cut the OCR twice, once this year, and again next year. Yet the bank's team of economists have changed their mind, and now believe rates will be on hold until 2022. 

Most economists, including those at ANZ and Kiwibank, expect the Reserve Bank's Monetary Policy Committee to cut the OCR once again this year. 

However, Westpac economists say the government's recent move to rule out Capital Gains Tax, coupled with an expected house price boost from the OCR cut, will strengthen the economy. The RBNZ itself is 50/50 on whether another OCR cut will be required, meaning some form of downside surprise would be required to actually prompt a cut. At this stage, we don’t think there is a high likelihood of that happening. They added.

The economists predict a huge boost for the New Zealand property market following this month's OCR reduction, with people able to borrow more at lower rates.

They said: "There is no longer any reason to think the housing market is going to slow in 2020. Far from it. We now expect house price inflation to accelerate to 7% by mid-2020, due to the recent sharp drop in mortgage rates." The economists added: "Our revised view that the housing market will accelerate over the coming year, rather than decelerate, has removed the rationale for forecasting an OCR cut in 2020."

Will Govt Hospitals look after you timely? 

 Here are some headlines from a few recent issues of New Zealand:

  1.  17th April: 100 dies during cancer drugs delay
  2. 6th May: Patients failed by health system as signs of disease ignored or misdiagnosed.
  3. 8th May: 100s dying on hospitals waiting list
  4. May 10: 800 New Zealand cancer patients could be saved.

You might be thinking; do you need health insurance?

In a word, yes. The New Zealand public health system only gives immediate treatment for acute conditions. If you have a condition which does not need immediate treatment, even if it is serious, then you could end up on a waiting list for months or even years.

Health insurance enables you to access the private health system in New Zealand. This consists of a large network of private hospitals, clinics and medical specialists, so you can get immediate treatment for the wide range of conditions which do not qualify you for immediate treatment in the public system.

Health insurance routinely pays for 100% of the costs of private medical treatment, after deducting an excess (if you have chosen to have one). Depending on the treatment required, these costs can be so high that many Kiwis would be simply unable to afford them without health insurance.

Health Insurance also provides options to get treatment in Australia and in other countries.

Talk to us for a no obligation chat to understand benefits of health insurance and we will advise as what options are available for you and how to minimise the premium.

Posted Date

21 May 2019

Reliance Newsletter February 2019

Reliance Newsletter February 2019                                    

Current discounted Interest Rates* as on 15th February 2019

Variable                      4.69%
6 Month Fixed              3.99%
1 Year Fixed                3.99%
2 Year Fixed                3.99%
3 Year Fixed                4.35%

4 Years Fixed               4.75%
5 Year Fixed                4.89%

These are not published rates of any bank. But for good sized lending of over one million dollars and low Loan to Value Ratio (LVR), Reliance Financial Group may get* these rates or even better depending on loan size. 

*Conditions apply



Official Cash Rate (OCR) remains unchanged

The Reserve Bank has opted to keep its official cash rate unchanged at 1.75 percent, in line with market expectations.

The RBNZ said its outlook for the economy was little changed. Employment is near its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.


RBNZ also expects to keep the OCR at this level through 2019 and 2020. The direction of our next OCR move could be up or down. Yesterday, the US Federal Reserve increased its federal funds rate to a range of 2.0 to 2.25 percent.

But Amongst banks, only ANZ Bank economists are forecasting an OCR cut by year-end. Others expect OCR hike slightly from next year. As such it is quite confusing and hard to predict which way OCR will go. It depends on several factors beyond any one’s control, like international economic and political outlook, inflation in New Zealand, labour market position and so on.

 But whichever way OCR moves, it will definitely not move this year at least and even whenever it moves, it will be minimal say 0.25%. It means mortgage interest rates will continue to remain lucrative for next few years at least.  

A prominent New Zealand economist last morning expected short term mortgage interest rates for one year or near  to further move down from current around 4% to 3.5%. Borrowing money has never been so cheap in New Zealand.


Good News for Prospective Buyers in 2019

If you are planning to buy your first home or upgrading to bigger home, you are in good negotiating position as it will remain buyers’ market throughout 2019 as it was in 2018.

The sense of urgency to buy a property regardless of its asking price has disappeared. Most properties are sold through negotiations unlike through auctions in the past. Secondly Prices are not going to move much during the year giving ample opportunity for first home buyers to find suitable property at right price.

Another good news is permission of the Reserve Bank of New Zealand, effective 1st January, to commercial banks to lend 20% of their new loans to owner occupiers with less than 20% deposit. As such major banks are opening the door to more low-deposit borrowers in the wake of an easing in home-loan restrictions. Most of these are first home buyers. Consequently, more loans will be approved. Last year, we struggled to get approvals above 80% and only very strong applications were approved.

Remember that new builds are exempt from the Reserve Bank rules. On top of it if you buy below $650,000 in Auckland you could be eligible to get up to $5,000 per borrower under the HomeStart Grant. If you are buying off plan or building new you could double your HomeStart Grant to up to $10,000 per borrower making it 20,000 for a couple.  Probably you can get some new houses in this range in Pokeno, if that suites you. You can also buy a section and build within 650K and you will be eligible for first home grant. Talk to us if you need a clarification. We will help you.

It is a good opportunity to find a suitable home at reasonable prices these days. Vendors are open to negotiation.  One of our clients has clinched a great bargain today by signing to buy a house with 880 sq. m land in an Otahuhu for under 700K.

So, look around and good bargain are available You will see several new houses are coming on the market.  These property developers will be quite negotiable in current environment as they have to sell their stock as holding cost is high as many of them borrow money at high interest rate from private lenders.  It all depends on where you want to buy. So, do some homework and find out trend in different suburbs of your interest. We get market feel on regular basis. Call us to have a chat.

Benefits of paying off mortgage faster

Enjoy the historically low interest rates and pay off your mortgage debt as fast as you can. Such an opportunity may not stay for long. Just think of a mortgage of 500K with an interest rate of 4.5% and payable over 30 years. By increasing the weekly repayments by 150, you can be debt free 10 years earlier and save over 150K on interest cost.   It is a huge amount. 

Also, it is not difficult to do so. You just need to find how to do it. For instance, you can keep a boarder who pays you room charges of 150 weekly. 

Everyone has a different situation.  Talk to us and we can examine your financial situation and make a fast payment plan for you as per your budget. It is at no cost to you.


First Home Buyers Share in new mortgage goes up

First home buyers enjoyed a record high share of the mortgage money handed out by the banks in December, according to the Reserve Bank's latest monthly borrowing by lender type figures.

The latest figures do emphasise the big drop-off in house buying that occurred in December as highlighted by the recently released Real Estate Institute of New Zealand figures for the month.

However, the overall tally of mortgages advanced during the month, at $5.371 billion, is in fact up about $300 million on the same month a year ago.

It is, however, down by around $850 million from the amount of mortgages advanced in November.

The FHBs have been gradually building their overall share of the borrowing the in past year - as well as borrowing increasing amounts in actual dollar terms.

In the latest month the $924 million borrowed by the FHBs accounted for 17.2% of the total advanced by the banks, which is a new high in a series that the RBNZ has now been publishing since August 2014.

House Prices in Auckland decline

Average residential property values in Auckland were almost 1% lower in January than they were in January last year, according to the latest valuation data from Quotable Value.

The latest value declines were evident in most parts of Auckland, with average values being lower January than they were 12 months earlier in all districts except Rodney.

The biggest decline was in coastal suburbs of the North Shore where average values in January were down 3.4% compared to January 2018.

Average values in Rodney, central Auckland and Manukau Central and North West went against the trend and posted slightly higher average values than a year earlier, while average values in the Gulf Islands were unchanged.

Barfoot & Thompson sold 653 residential properties in January, compared to 593 in January last year and 629 in January 2017.

However, numbers remain down on where they were during the 2013-2016 boom when January sales were consistently above 800.

Prices were slightly softer for the start of the year's trading, with Barfoots recording a median sale price of $827,500 in January, down from $875,000 in December but almost unchanged from the January 2018 median of $830,000.

House prices have been predominantly affected by ban on foreign buyers, LVR restrictions, removal of income tax benefits on rental property incomes, increasing new construction activity, KiwiBuild programme and of course low affordability particularly of first home buyers.

Buying off the plan   

 Generally, buying off a plan means paying say 10% deposit upfront to secure the property. The remainder of the money is due on completion of the build. Developers who are planning to build apartments or a town house complex will often sell the units off the plan before the construction has started. You can see images or sometimes visit a show home to get an idea of what you will be buying.

There are benefits to buying off a plan. You are signing up for a new home that should meet all the latest building specifications, and you are buying something at a set price with an initially low outlay (the deposit). A long settlement period gives you time to save money for the final payment. If the market is buoyant, the property may also increase in value over this period, so you will be getting more than what you paid for.

Some possible risks are as:

  • Market values may fall, and you may be committed to paying more than the property is worth.
  • Find out developer’s reputation and track record.  Do some due diligence as you are entirely reliant on the developer and construction firm. Look their previous developments they have been involved in.
  • Some lenders will place limits on home loans to people buying off plans.
  • Check all the details to make sure the finished property will meet your expectations. Ask questions about the drawings or show home. What size were the beds in the promotional shots? Is the building to minimum standards or is the specification above and beyond? Check security and safety features. Ask for detail about the common areas.
  • The build may take longer than expected which may mean you are paying rent for longer than you had budgeted for.
  • The interest rates may go up or lending criteria may change. So always get bank’s approval while signing the contract.
  • If the completed complex will have a body corporate, find out how this will be managed and the costs you will need to budget for.
  • Some contracts are designed to allow buyers to choose the floor plan or the fixtures and fittings. Others may allow the developer to change the layout without checking with you first. It’s important to understand every aspect of the property.
  • It’s important to engage a lawyer to help you understand all the details of the contract. Check to see if there is a ‘sunset clause’ that specifies what will happen if the development is not finished on time. You should also ask what will happen if the developer goes into liquidation and the project is sold to another company.

 Free Medical Insurance for your child !

A major health insurance company has a special offer. If you take Ultimate Health Max Health Insurance Policy of nib, they will offer to insurance your child for free for twelve months. If two adults take said policy, two children get free insurance for 12 months.

nib’s Ultimate health max is one of the best insurances covers available in New Zealand. Talk to us immediately as above offer expires on 28th February 2019.

Some parents have a number of health conditions  which will  not be covered by medical insurance. Just keep in mind you can do medical insurance for your  children alone as well and only premium applicable for a child will apply. Children’s monthly premium is around twenty dollars or less. So a cheap way to insurance health of you kids. Once they grow and start working  they will start paying their  own insurance. Some grand parents also give this gift to their grandchildren and  buy medical insurance for grandchildren  as premiums for kids are very low.

Also note you will get free travel insurance for all people insured under the policy when you take their Ultimate Health Max and it will continue so long as your policy continues. No other insurer provides this great benefit.








Posted Date

19 Feb 2019