Leighton Smith: Influx of Hong Kong funds welcome in slowing economy

The New Zealand housing market has taken a dive. Photo / Rafael Ben-Ari/Chameleons Eye

COMMENT:

I was in my teens when Mother developed a strong interest in the sharemarket. It was a dramatically different game in those days where the only communication method from the dining table in the suburbs was a telephone. The kind that had a cord attached to it and plugged into the wall socket. The Sydney Morning Herald business segments would pile up as long as she thought necessary, and that along with regular radio reports on the day's activity was how she conducted business. Unless she caught the heavily subsidised train into the city and watched the activity on the exchange floor, which she did frequently. Mum started with a modest amount of her savings, which she parlayed, through her own research and judgment, into a growing portfolio. It wasn't a hobby, it was an enterprise.

The one stockbroker from whom she took (some) advice was Bob Gottliebsen, albeit for a short period in the early 70s. Short because Bob aka as Robert ventured from journalism into broking for a few years. Something to do with a need for money and journalism wasn't well paid. By 1974 he was back in business journalism and never looked back. Still very active today, he is familiar to plenty of Kiwis. It is this history that provides credibility for what follows.

The Australian and New Zealand housing markets have slipped, taken a dive, call it what you will. Last Monday, July 15, Gottliebsen published a column headed Hong Kong property trickle to become a flood. He issued an alert a month ago, at the time of the Hong Kong street protests. He referred to a Bloomberg report that Singaporian private bankers are flooded with inquiries from investors, that being a sign "that the money exodus to Australia was about to move up a notch". Figures from the first quarter of 2019 show the Chinese prefer Melbourne, 44 per cent, to Sydney, 23.9 per cent, of total Australian housing investment. Auckland, to me at least, is the third most important city in Australasia.

Would anyone not expect that some of those funds would find their way via Singapore to Auckland one way or another? Should that eventuate it would be a surprise if those funds were not most welcome in what is recognised as a slowing economy.

With the Reserve Bank of New Zealand (RBNZ) imposing new requirements on the commercial banks alongside the latest, but not last expected lowering of the OCR, there is another correlation in the making. That is, the Reserve Bank of Australia lowers its benchmark cash rate to 1 per cent. The RBNZ to 1.5 per cent. This further exacerbates the plight for savers and retirees in New Zealand. In similar situations past, many have lost much or all of their savings and investments through various investment vehicles. What to do for those who are affected this time?

Non-bank financing is a likely magnet for savers and retirees looking for higher returns. Photo / 123rf

As in Singapore and Australia, non-bank financing is a likely magnet for those looking for higher returns. And it's not greed that will be driving them in that direction but the need for living expenses.

As an addendum, it was because of Mum's success, partly due to Gottliebsen, that I was able to buy a house in the second half of the 70s. She drove a hard bargain and I borrowed $5000 to buy a basic-condition Paddington terrace house. Full price $35,000. After living in it for two years I rented it, moved out of Sydney and sold it in 1982 for $85K and bought in Wellington. Mum was paid with interest. Because everyone loves a house story, let me update. That Paddington house was sold a couple of times. It was renovated at some stage, not terribly expensively. The last sale was in 2011 for $1.025m and is now valued at $1.3m. That is 37 times what I paid for it. Crazy! But that's the way the world works.

The details with pictures are all on the internet. And a quick calculation reveals 37 times what I earned back then would be $9250 a week.

Could John Banks be Auckland's next mayor? Photo / Dean Purcell.

On another matter, one of considerable importance, that being Auckland governance and the Local Body election. The announcement this week by John Banks that he is likely (you know what he means) to announce his mayoral candidacy soon will be welcomed by many voters. Competition contributes largely to what democracy is all about. Some say the Auckland Mayoralty is the second most important/influential position in the country. Be that as it may, it is a serious position to hold, more so now than when Banks last held it for two terms up to 2010. Since the combining of all the Auckland councils to make the Super City since that 2010 election, Banks has had some rough patches but with that came considerable maturation. The fact that he is back in the fray is indicative that his old fight has returned. And Auckland needs someone, whatever gender, with the ability to scrap and the heart to care. Banks still feeds the stray cats. Make your choice and vote. It's important.