Welcome

Welcome to our August edition of our quarterly newsletter – marking the end of what was a challenging winter for markets across the board (well I think the supermarkets still did ok to be fair…).

The housing market correction has been in full flight – you really can’t just keep travelling at breakneck speed without eventually breaking one’s neck. In the last six months, we have seen prices softening in most regions across New Zealand. Higher interest rates, tougher bank servicing criteria (bank ‘test rates’ increased), negative net migration and a rapid rise to cost of living making everyone feel just a little poorer. If we look at the below REINZ chart which indexes nationwide house prices, we can see that prices are still above the long run trend line, but at current trajectory your editor suspects some further softening to come. 

In brighter news, Spring is just around the corner which typically brings a flurry of listings and more choices for home buyers. Many vendors do tend to defer listing their home for sale in the winter months with soggy lawns, gloomy dark lounges and pessimistic vitamin D deprived buyers nervous to venture out to the open home circuit in the rain and cold. This year the question to be seen is whether buyer demand will meet the upcoming increase of supply come Spring.  

 
Thankfully, we did see some strong late phase recovery in share markets hit in recent weeks - this highlighting the importance of holding course with your chosen KiwiSaver fund during times of market volatility. Temptation often exists to move to more conservative funds when markets do soften. Unfortunately, this practice can crystalise one’s loss and we then miss the strong gains to be had when a recover occurs.  Growth funds in particularly bounced back well last month clawing back a portion of the losses sustained earlier in the year and if you held course in your fund – you would likely have ‘purchased’ more units in the underlying fund while the prices were on ‘special’ (e.g. a consistent fortnightly pay cheque will purchase more units in a fund each pay cycle when the fund is down. ‘When a shoe shop has a sale everyone rushes in, when the share market has a sale, everyone rushes out’