Riding the Downturn.

A few people now have asked me what the impact of the financial crisis has been here in New Zealand. First off, I am most definitely not an economist (didn't even play one on tv), nor do I have my finger on the pulse of the New Zealand markets. I do, however, have a friend whose in the financial trade as well as a vested interest in the country around me. So briefly, here's what I'm seeing these days:

Right off the bat, the NZ Dollar has tanked. it was hovering around 0.77$Cdn when we moved here, now it's aroun 0.63$Cdn. Though this is actually quite beneficial for someone with money outside of the country who's planning on staying, overall it's made life much more expensive. Gas is up 0.40$NZ/Litre, most consumer goods have gone up about 20% and it sounds like they are going to keep climbing as transport costs increase. Our grocery bill, surprisingly, hasn't gone up much at all. Carly and I try and only buy local produce, meat and other products, so we're not seeing as much of an impact.

Other then that there's definitely been some losses of jobs. There's a lot of talk about some smaller redundancies, though there haven't been a lot of big announcements. I heard through the industry contacts I have that there were some layoffs in my field, which is one of the reasons I decided to jump on the opportunity I was offered.

There's been some coverage of the New Zealand real-estate market in Canada. My dad mentioned some of the coverage was spinning it as a collapse, or at least a dramatic decrease. From what I've seen and talked to my friend about, the context of real-estate in NZ makes interpretation a little more difficult. Yes, the interest rates are the lowest they've ever been (hovering around 5-6%). Sales are down and average price is down slightly. This doesn't quite paint an accurate picture however.
From my understanding, Auckland is having a worse time of the crisis then the rest of the country. Auckland also represents 50% of the population. When things are bad there, the national numbers take a dive. Prices for housing in the major urban areas were in many peoples eyes overinflated and Auckland was the worse. So it's correcting and by doing so it's dragging all the averages down.
There's another big factor to take into account that isn't as clear. NZ tax law is vastly simplified compared to the US or Canada. As such, there are very few ways of reducing the amount of taxes you pay. The most popular is running a business of some kind as secondary income. This allows you to write off a part of the expenses. So many people choose to own an income property as their business. It's a bit like a forced savings account, it makes a little (maybe 5%) return on average, you have to pay down the mortgage every month, but you get to write some of it off.
There's been a definite hit in the income property market. There's no doubt about that. We live in a building where most of the apartments are bought to be let and the ones that are for sale right now aren't moving no matter what they try. However I'm not convinced that the residential (primary market) is doing that badly. Prices for houses we'd consider buying are staying pretty stable and they seem to be moving, at least in Wellington.

The biggest thing I've noticed however are the number of small businesses that have folded. "97 percent of New Zealand businesses employ under 20 staff." according to this article. Many of them are hurting. Doing a walk through our neighborhoods (Mt Cook and Newtown) you see a lot of For Lease signs. Small companies are letting go of staff, having very agressive sales and being bought up by other competitors. The Readings mall is a ghost town, I counted at least 6 For Lease signs. Some businesses are still operating despite the fact their building is up For Lease. I don't quite know what that means, but I'm guessing it can't be good.

Overall, the downturn has definitely hit New Zealand. We're seeing the government take the same line as many other countries, stimulus packages flying left and right. Carly and I are lucky that we're both employed right now, Carly for a year, I'm starting a new job so should be covered for at least a little while. Hopefully it doesn't last too long, but if it does, it may make buying a house a lot easier :) Silver linings and all...