It’s that time of the year when a lot of us reflect on what we want to achieve over the coming 12 months. We set ourselves common goals such as losing weight, getting healthier, buying a home, preparing for retirement. We give them a crack for a wee while and then we forget about our goals. I’m as guilty as anyone else. When I reflected on the goals, I set for 2021 I hit 4 out of 8. One goal was forced upon me (improve health). When I review the goals that I hit vs the ones I didn’t, there were common themes. They were:
I’ll give you an example. I went to see a doctor as I was feeling exhausted. My blood sugar levels became borderline diabetic during the year. I felt like this was a goal that I had no choice but to prioritise. The doctor advised me what I needed to do. So, I sat down and made a plan with my family that involved a new diet, new exercise regime and it required their help.
Just about every day when I got out of bed to hit the Papamoa hills I didn’t feel like it. Janet, my wife, tells me that everyday I would say I think it is going to be a slow trip up today. But I would get my gear on, get in the car and make the trip. Often, I would start slow (mainly because I didn’t want to be doing it). Then, invariably because I am competitive, I would start competitions with other climbers. They just didn’t know it. If someone overtook me, I was going to take them down before I finished, or I would target someone ahead of me and try and chase them down. Every time it worked. I would always come home feeling great with more energy. I monitored my weight on the scales and after two months got my blood results measured again. They came back normal. So, at Christmas I allowed myself a few treats. However, I am acutely aware I need to stick to the plan to avoid the need to take drugs for the rest of my life.
If sorting out your finances is a priority for you in 2022. Whether that be buying a home or setting yourself up for retirement, it is the same process you need to follow. The trouble is people go for big gestures or grand plans to fix things quickly. If they are investing, they bet everything on black (black could be a property purchase, investing in Crypto, a couple of shares that have done well for someone else). The problem with betting it all on black is that red wins just as much as black. So, when red wins, they give up because they don’t know what to do next or it just got too hard.
When buying a property people often fail to review their budget. It’s surprising how many big income earners spend more than they earn. It’s often because they have got into some bad habits that they aren’t aware of. If you expect someone else to lend you a million dollars, you should really make the effort to understand your situation. Yet when things get too hard, they can’t be bothered.
If it was your health, would you give up? Just like your health, the choices, and decisions you make early on with your finances will impact on your well being in the future.
Here’s Tony Alexanders monthly economic view below.
The year has started with a run of reports showing strong rises in average houses prices over 2021. Some even show prices as still rising firmly over November and perhaps December. One thing to note about some of the data received so far is that they largely reflect transactions early in the December quarter and as yet accurate information on how strong December was is not quite in hand from the REINZ – my preferred source.
The chances are prices did lift at a firm pace in December. But we are in the end-game for soaring house prices now that the number and strength of factors restraining demand and boosting supply are so great.
Demand is principally being stripped out by the new CCCFA rules and some borrowers not being able to afford slightly higher interest rates. Supply is booming in terms of new construction with a lot more to come and that is where things move into interesting territory.
Most people do not need to buy or sell a house right now. They can shift their transaction through time, and what we have seen for the past two years is a lot of people bringing their purchase forward in time perhaps because of inability to travel overseas.
As data emerge showing slowing house price growth, booming supply, net migration outflows, and diversion of spending offshore again (eventually), two interesting things will happen. First, more vendors will step forward deciding to meet the market and no longer in fear of selling then not being able to buy again. This will boost listings and we can already see this in action with the stock of houses for sale at the end of December 30% higher than a year ago.
Second, buyers will shed their visceral feeling that they have to purchase as soon as humanly possible. Many will step back to see how things pan out. The speed with which these divergent demand and supply factors operate will vary tremendously from one part of the country to another and the outcome is likely to be prices still rising at a firm clip in Christchurch, flattening in Auckland, and probably falling slightly in Wellington.
For buyers the environment (as long as one can get a mortgage through the LVR and CCCFA hoops) is definitely improving. For vendors it pays to recognise that even though demand is easing the queue of people looking to make a purchase is still very long. And with the labour market so strong, hopes of finding bargains seem well misplaced.
For additional information on the economy, housing market, and interest rates, you can subscribe to Tony’s free weekly Tony’s View publication at www.tonyalexander.nz
Disclaimer: This newsletter is meant to be informative and engaging, hopefully not a cure for insomnia. Please don’t take this as personalised financial advice. Discuss your situation with an Advisor. This is where I need to say past returns are no guarantee of future returns.