Welcome to 2022!

We’re back in the office and ready to roll into the New Year. We hope you’ve had a chance to refresh and energise because there’s a big year coming up and plenty of opportunities to get ahead financially.

We thought we’d kick the year off by looking at the challenges and opportunities that lie ahead in 2022. We’ll touch on inflation and what it means for Kiwis. We’ll look at how best to apply for a loan with the banks now in full forensic mode thanks to the new CCCFA rules. Finally, we’ll talk about the chances of property prices levelling off and our thoughts on preparing for if they do.

It may all sound a bit scary but it’s worth remembering that with change comes opportunity, and we believe that with some smart planning you can not only protect yourself and even get ahead this year.

Inflation is on the up and up and up and up…

Unless you’ve been holidaying on a private island with no internet, radio or TV then you’ve probably heard all the talk about inflation.

It’s an important subject because inflation is the reduction of purchasing power of a currency. That is to say, the New Zealand dollar now buys fewer products or services than it did at the same time last year. In fact, it’s the biggest increase in consumer inflation that New Zealand has seen since 1987. The knock-on effect is that everything becomes more expensive as inflation rises, and we mean everything; from a bottle of milk to the interest payments you’re paying on your mortgage.

The question then becomes why has it happened?

The answer is long and quite complex, but to summarise briefly the below factors conspired to drive higher levels of inflation in our economy:

The government pumped money into the economy in the form of grants due to the prediction of a recession.
The economy actually continued to power on and no major recession occurred.
Asset prices rose.
There was strong demand but the reduced supply of products and services.
There were labour shortages.

We’re predicting that inflation is likely to continue to rise throughout the year, but there is an upside for those people who have been cautious while times have been good. When inflation rises the unfortunate reality is that some people who have overextended themselves may have to reduce their debt, this provides opportunities for people who aren’t in this position to acquire consumer goods, investments and even property at discounted rates.

CSI: NZ Banks. How to get a loan in 2022?

With new CCCFA rules having landed this is a question we get all the time. If you’re not familiar with what the CCCFA rules are it’s worth reading our previous blog to familiarise yourself as these rules have dramatically changed the bank’s attitudes to lending money.

The banks are now almost forensic in their examination of the accounts and spending habits of people looking to borrow money. The reality is that if you want to borrow money you’ll need to ensure that your bank statements are clean for a minimum of three months. This means reducing any spending that may be seen as frivolous by the bank. Things like takeaways, nights out, retail spending etc will need to be managed tightly before your application to give you the best chance of success.

This level of financial interrogation has seen the number of accepted mortgage applications fall by 25% which has led some experts, including us, to argue that these rules have gone too far and are too invasive and prohibitive to be realistic in the long run. To put it quite simply we don’t think that you should be punished by a bank because you’ve decided to have a three-piece quarter pack after a really tough day at work, especially in an economy that will require consumer spending to keep moving.

Banks are now using your previous spending habits to establish a pattern.

But the harsh reality is that banks are now using your previous spending habits to establish a pattern. They are trying to answer the question as to if you can pay your mortgage and bills if interest rates go up. They are taking any expenditure in the last three months from your statements and basically saying that you will always continue to spend like this even if interest rates do rise and therefore you may not be eligible for a loan.

The reason we think this is so silly is that most people are capable of budgeting out their wages or salary to pay their bills. Most people will naturally reduce their spending on nice to haves if they need to spend that money on more important things like bills or a mortgage. People are grownups and as such can budget and prioritise, the CCCFA rules, however, are making banks treat grownups like children and that is where they go too far.

There is good news though; if you are looking to apply for a mortgage for a first home there is the chance that you’ll face less competition if you can successfully get the loan. There are also some really basic things you can do to ensure you have the best chance of succeeding in your application. Give us a call as we deal with this challenge every day, and we can give you some tips and help you navigate this more complex process.

Will the property market finally cool in 2022?

This is another question that we have been bombarded with recently. The media has begun to speculate that 2022 might finally be the year house prices cool off in New Zealand and lots of people are asking whether this is true.

We’d begin by saying that we’re always hesitant to make a definitive call on this question as we’ve seen dozens of commentators with egg on their faces. These commentators boldly claim house price rises are unsustainable and that a “sharp correction” is imminent only to find that in the months following house prices continue to boom. What we would say however is that this year it’s looking far more likely than at any other time in the last decade. This is due to several factors:

The new CCCFA rules reducing the number of new homebuyers in the market.
Inflation driving up interest rates causing some people to hold off buying while others struggle to service their levels of debt.
The long tail of Covid that’s at best unpredictable given the contagious nature of the Omnicron.

So back to the question; will house prices level off in 2022? The short answer is maybe. The long answer is that if they do and you’re a first home buyer, an investor, or just looking to upsize then now is the best time to get your finances in order. This will ensure that you are ready to pounce and take advantage of any great deals or opportunities as they present themselves.

Here’s to a big year

As we said upfront there are lots of changes, challenges, but most importantly opportunities on the horizon in 2022. We know how scary a year like this may seem but we’d encourage anyone reading this to consider how exciting it could be too.

If you have any worries about your finances after reading this we’d love you to drop us an email or give us a call so we can chat about how can help. On the flip side if you’re interested in getting ahead this year we’d equally love to hear from you.

We’re looking forward to getting stuck into the new year and we hope to hear from you soon.

Cheers,

The Money Men

The year ahead - Property Outlook for 2022

We wanted to start this month’s blog by saying happy holidays to everyone, well done on getting through a challenging year and we wish you all a safe New Year. If you’re anything like the team here, you’re looking forward to a hot summer with plenty of cold drinks and minimal talk of Covid. For us, this time of year is always about reflecting internally as an organisation, celebrating our successes while identifying key areas we want to improve in the year to come. We’d encourage everyone reading this blog to spend at least a little time over the break thinking about your financial goals for 2022. To help, we are dedicating this month’s blog to look ahead at what we think the year to come has in store.

A cooling property market in 2022?

Property prices have exploded over the last few years, and no matter where you sit on the ladder you’ve probably come to the same conclusion we have; in the long run it’s unsustainable.

That’s why we can say we’re honestly glad to predict that in 2022 the market will cool slightly. We don’t think it’s going to be a full-blown buyers market, and it certainly won’t be a crash. Instead what we’re predicting is a slight cooling off and maybe a small decrease in prices toward the back end of the year. What this means for buyers is that there will likely be some fantastic opportunities. We’d encourage you to ensure your ducks are in a row so you are prepared to buy. If you need help planning don’t hesitate to contact us today.

So the question, particularly for owners, becomes why is the market going to flatten? We’ve provided a list of reasons below but to summarise demand is going to drop and supply will increase which will level off the playing field. We’ll also have a period in which sellers will expect to realise the high prices they have seen in the past but buyers won’t be willing or able to pay these prices meaning more properties passed in which in turn will trigger a change in market expectations.

We have seen property listings getting closer to where they were this time last year
Increase in construction
Rising interest rates
New tax rules for investors
Much tighter lending rules from the banks

Looking back at 2021 and ahead to 2022

In 2021 we felt we had a great year. One of our goals as a business is to take the fear out of finance for everyday New Zealanders. We were incredibly proud to be asked to give advice on The Rock at the beginning of the year and now on George FM as well. We thrive when offering expert advice and insights in a commonsense way that is easy to understand and being asked to do it on radio was testimony to the fact that people saw value in our approach. For those of you who have been following us on the radio, we hope you’ve enjoyed the banter, but most of all we hope that you were able to use the information we share to improve your financial position.

In 2022 we have big plans for the business. Our main goals are to grow our team and to continue to develop new ways in which we can add value for our clients. As always, we’ll continue to deliver expert advice in a way that is easy to understand and helps everyday Kiwi’s get ahead.

Get free money from the Government to grow your business

If you’ve been running a business in Auckland in 2021 then you’ll be well aware of the challenges that Covid posed, but hopefully, you’ve also heard of the MBIE Activate Auckland business grants that can go a little way to alleviating some of the pain. There are a few different grants available, but the two standouts are:

Business advice grant – This grant is for up to $3,000 and it allows you to get expert advice and support to ensure your business keeps moving forward regardless of what Covid throws your way. It can help with areas like financial planning and cash flow management, developing your marketing strategy, creating a digital media plan, or help with your overall business management, continuity, and strategy. All of these areas are particularly important and will help to ensure that your business has the right plans in place to continue thriving regardless of the Covid situation in 2022.

Implementation grant – This grant is for up to $4,000 to implement advice or plans. For a lot of businesses, the reality is that they have a roadmap or plan for the future but might not have the cash reserves to make it happen. This grant can put you in touch with the experts and services you might need to turn these plans into action.

If either of these grants feel like they would be helpful we’d really encourage you to register here, or get in touch if you need a hand.

See you next year

So that’s it from us for 2021. Again we wish you a happy holiday and a safe new year.

Rest assured that if anything urgent pops up you can simply call us on 0800 888 482 or email us at support@moneymen.co.nz .

Otherwise, we’ll be back in the office on the 17th of January ready to kick into a massive 2022.

All posts by Josh

Inflation, the new CCCFA rules and how best to apply for a loan