The four horsemen of the New Zealand apocalypse are the supermarket, petrol, insurance companies and the banks. There is zero public appetite for ‘excessive profits’ which has resulted in multiple formal and costly investigations being commissioned. But how much is too much and is a bank making a substantial profit really a bad thing? Before we answer this question, we ponder ‘how did we end up here?’
Five working days for finance
Prior to the mid 1980’s Kiwi banks were exactly that, New Zealand banks, and lending capital was sourced domestically. If you have a chat with any boomer about their attempts to secure mortgage finance, they will happily regale you with tales a little like this: ‘We got dressed in our finest attire and went cap in hand to the bank manager, at the time he was almost the most powerful person in town. We were given a loan for a portion of our mortgage, the remainder was made up by a second tier lender with rates topping out well above 20%!’
The experiences of the 1980’s are in stark contrast to the present where it is not uncommon to have a loan approval turned around within a week. Yes, administrative processes are more advanced, but the banks also have a greater capacity for lending.
Big brother knows best
After the mass deregulation of the New Zealand economy in the 1980’s, our banking system opened up and foreign investment was encouraged. It was a natural fit for the Aussie banks because of our close trading partnerships and similar legal systems. The last of the big five banks, BNZ was sold off by the government in the 1990’s after it ran into trouble and had to be bailed out. These days, and because of the merger of National Bank and ANZ, our top four banks are all Australian owned. Now this could be seen as a negative, but the benefit, and one which is not readily discussed, is the increased capital now available to New Zealanders.
The introduction of Australian capital has played a significant role in New Zealand’s economic prosperity over the past thirty years. This was particularly evident during the Global Financial Crisis where the banks held up well comparatively. This was all thanks to their Australian big brothers.
The byproduct of growth for the banks is profit. Namely the margin between the value the banks borrow and lend money at. What has been highlighted recently is that on a percentage basis the banks make a higher return in New Zealand than they do in Australia. Is this really a problem, or is it simply the price of progress?
If it’s not broken
While this is a hot topic, if the system isn’t broken it’s unlikely to change. At the end of the day, a bank is a business and businesses are entitled to make a profit, provided of course they are operating within the rules and regulations. As a country we have a sense of grandeur and importance, but the reality? On the world stage we are small fry. Even Belarus exports more goods than we do. Yes, the banks are making a great return. From a personal standpoint I would rather have my money in a bank which is financially stable, able and willing to lend, than one teetering on the brink of collapse.
The Wellington market
Yesterday marked our second Auction event and it went off without a hitch. There was a full buffet of properties on offer from first homes and investments right through to the high end. More than $5 million worth of property changed hands, with bidding on everything and five out of six properties sold under the hammer. The final property went under offer later in the day.
Wellington’s real estate market has been very tough for the last year and buyers have not responded as well to private negotiations as they have in the past. It was time to try a different approach and our success to date proves that auction was the right choice. Auctions provide transparency and confidence to buyers who can see the competition in the room. They are given unlimited opportunity to revise their offer by way of bids right up to their maximum. You can see that from the bidding on each property, in some cases up to 21 bids! There is no doubt that auctions provide social proof to buyers.
We are excited to be able to use auction as a strategy moving forward as we truly believe it is the best approach for both our vendors and buyers in the current market.
Please feel free to call and chat to us if you want to hear how auction can work for your property in the current market.
Wellington Market Quick Stats
What’s on this April in Wellington?
Highlight: Carnival of Lights, 6 – 9th April 2023
An illuminating experience like no other! For four nights over Easter Weekend 6-9 April 2023, HighLight transforms Brewtown, Upper Hutt into a spectacular carnival of lights for all ages.
Nothing will be quite as it seems! Follow the twists and turns as you journey through Brewtown in an entirely new way. Be immersed in illuminated colour and light installations, live performances, fire and light show, interactive activities and more.
The 1975 – Live in Concert, TSB Arena, 19th April 2023
Acclaimed English pop rockers The 1975 will perform at Wellington’s TSB Arena on 19 April for the first time. Formed in Manchester in 2002, The 1975 have established themselves as one of the defining bands of their generation with their distinctive aesthetic, ardent fanbase, and distinctive sonic approach to their pop rock repertoire.
THE FIFA WOMEN’S WORLD CUP 2023™ UNITY PITCH – 11th – 14th April 2023
From 11-14 April, the public can watch and take part in matches on a specially made, brightly coloured football pitch. The pitch reflects the unique cultures of both FIFA Women’s World Cup Australia & New Zealand 2023™ co-hosts.
The FIFA Women’s World Cup brings together many diverse people and cultures. The Unity Pitch reflects the 32 nations competing in the tournament and shines as a symbol of unity and progressiveness. Measuring 15m x 25m, the pitch will be set up on Wellington’s Queen’s Wharf and will feature games from local adult, youth, and disability football groups. There will also be multiple opportunities for the public to get involved as well.