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How will it impact you if house prices drop by 15%?

New Zealand’s housing market decline has started to show in the numbers, with average values down across most of the country for three months in a row.

Westpac economists have predicted house prices will fall 10% in 2022, and another 5% in 2023, for a 15% drop in total. This sounds concerning, but should you really worry?

Predictions can be inaccurate

First, it’s worth bearing in mind that housing market predictions are notoriously unreliable. Research has found economic forecasts are often wrong. The economy is extremely complex and people aren’t very good at correctly predicting what will happen. And just like with the weather, short-term forecasting is easier than long-term forecasting.

In a report, Westpac’s Acting Chief Economist Michael Gordon recently commented that 15% would only take us back to 2021. ‘A 15% drop seems very large compared to history, but to put it into context, it would only take average prices back to where they were at the start of 2021’.

How will you be impacted depends on a number of things:

• For homeowners, provided you aren’t forced to sell and you can comfortably pay your loan, you can just sit tight and wait for values to recover.
• For movers, you should be buying and selling in the same market.
• For first-home buyers, falling prices like this won’t help as much as you might like due to the higher cost of interest.
• For investors, the prices aren’t the problem, it’s the access to lending that will trip you up.
• For developers, this is a major concern if you have properties that will come to market this year.

We can help you sort out your finances

Worried about higher loan repayments? Considering buying a rental property while they’re more affordable? Want to know how falling prices might affect you? We can help – just give us a call or send us an email.

The new Business Growth Fund – could you benefit?

The Government is investing $100 million into a new Business Growth Fund, it announced in the latest Budget. This funding is designed to help small- to medium-sized businesses (SMEs) get the investment they need to grow, while allowing owners to keep control.

Why has this fund been launched?

It’s always been hard for SMEs to get business loans, which can hold them back from growing into larger operations. If you have ever tried to get a loan for a small business, you’ll know the banks can be reluctant – they’ll often ask for the loan to be secured against your home. This pushes many small business owners to use mortgage debt to fund growth, which skews our household debt and business investment data.

For businesses that are able to secure other types of investment, the investors will usually require a significant stake in the business. This can take the majority shareholding out of the hands of the original owner, and sometimes out of New Zealand.

How will it work?

The Business Growth Fund (BGF) will partner with retail banks to lend money to Kiwi SMEs. The banks will choose the SMEs for funding and the BGF will take a minority shareholding in each business. The BGF will provide support to the SMEs, Minister for Small Business Stuart Nash told reporters, and will have “modest return expectations and no hard exit deadlines, allowing business owners to set their own growth targets.”

Will your business be eligible?

Unfortunately, we won’t know the details on the Business Growth Fund for some time – it could take many months before it is up and running. Bank partnerships have not been established and criteria have not been set. We’ll be keeping a close eye on how it’s tracking and keep you up to date.

Looking for funding now?

If your SME needs funding for growth, there are a few other options in the meantime. Applications are still open for the Small Business Cashflow Scheme, which is an option for SMEs struggling with a pandemic-associated loss of income. There are also bank loans, private equity and angel investors, not to mention tax pooling for those big tax bills.

Give us a call and we can talk you through the various options. We’re here to help.

Register for our 3 Freedoms in Business Educational Video

If you’d like more money, more free time, or less stress, register for our next educational video, The Three Freedoms in Business, and learn how you can achieve these for yourself

Available Thursday 9th of June

We have a short quiz that we would like all participants to take so we can share the results during the video.

https://forms.gle/nDbAzuGxYkegp8cX8  please click on the link and to take the quiz now – takes less than 5 mins to work out which is the most important freedom for you right now.

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