Last week I sent a survey link out to my 25,000 subscribers inviting those with experience of past high inflation to offer up their thoughts on saving money. I did this because the inflation rate which acts as a broad proxy for how much our cost of living is going up sits currently at 4.9% and very soon will be reported near 6%.
Wages are not likely to increase to match the annual cost of living increase let alone exceed inflation by 2% as is the average over the long-term. That means household budgets are coming under strain. In fact the strain is greater than the 6% inflation rate suggests because of rising interest rates pushing up mortgage servicing costs which are not captured in the inflation measure.
Over 450 people sent in their suggestions and amongst the top ones were cutting out drinking and eating away from home (coffee, booze, food including work lunch), reviewing all the subscriptions one has probably built up (streaming services etc.), and growing one’s own veges.
That last one will not be an option for a lot of people and even when it is results may be better by only buying in-season fruit and vegetables through the year.
Start your property search
As I was getting ready for a radio interview on the new difficulties being experienced by young home buyers because of the Labour government’s changes to the Credit Contracts and Consumer Finance Act, this thought belatedly occurred to me. The survey results will also be of interest to people wondering how they can cut expenses to be able to qualify for a mortgage following the revamped legislation.
So, if you’re a first home buyer looking for ideas to get around the new ownership roadblock the government has put in your way, peruse the ideas in the pdf on the Publications page of my website www.tonyalexander.nz.
On another matter, by this time next week I will have in hand the results of my first mortgage adviser survey for the year run alongside mortgages.co.nz.
Economist Tony Alexander: “Top suggestions were cutting out drinking and eating away from home.” Photo / Fiona Goodall
The previous survey of four weeks ago showed a net 75% of advisers seeing fewer first home buyers coming through their doors and a net 70% seeing fewer investors. Many investors left the market last year after the March 23 tax announcement. But it is first time buyers now feeling the impact of government policy.
We see this same disproportionate hit to first home buyers from my last monthly survey of real estate agents which was run at the end of November. A net 56% were seeing fewer first time buyers and 50% fewer investor buyers. So many buyers are now excluded from the market that they have given up hope and FOMO – fear of missing out – is back to 2020 lockdown levels.
The impact of the credit crunch started to appear in September and REINZ data just released for December tell us that there is now a price impact occurring in the housing market. Average NZ house prices fell by 1% in December with Auckland down by 2.3%.
Monthly numbers can be quite volatile in our small economy, and we have seen negative monthly movements many times in the past. To see such now is hardly surprising considering the way prices have soared since mid-2020 and the way in which so many people can no longer get a mortgage to buy a house.
But the weight of factors restraining house price gains now easily exceeds boosting factors and for that reason 2022 is likely to be a year of reasonably flat prices on average, though with some ongoing large differences between the regions.
- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz
