Aurelia Butler

Anne Bate felt “crazy” trying to downsize in the middle of a global pandemic. But selling her home in the paradise of the Pahi fishing village in the north-west of New Zealand’s North Island proved the easy part. It was in Timaru, her destination some 1,360km away on South Island, that Bate experienced the other side of the market. “It was like the quick and the dead,” she said. Even as a cash buyer she said it was a “miracle” that she managed to find a place and move closer to her grandchildren. New Zealand has been in the throes of one of the biggest property booms in the world. A relative safe haven, with comparatively low cases of Covid-19, the median house price has surged by 43 per cent over the past two years, according to Sense Partners, an economics consultancy. That has left buying a home beyond the grasp of many Kiwis. With the median house price now ten times the median annual income, the government and the central bank have struggled to find ways to cool the market without triggering a crash. The country is an extreme example of what’s happened to housing markets during the pandemic. Prices have surged from Canada to Australia since the first quarter of 2020, when policymakers launched a fiscal and monetary stimulus. Wage growth, meanwhile, has been more modest. Now, as inflation takes hold across the globe, buyers and sellers are waiting to see what the removal of central banks’ and governments’ stimulus and a series of rates rises will do to the housing market, and the wider economy. The Reserve Bank of New Zealand began tightening monetary policy last October, after an 18-month spell during which its benchmark cash rate was just 0.25 per cent. The rate has been sharply increased to 2 per cent and is seen hitting 4 per cent within a year as the bank tries to chase inflation — now at almost 7 per cent — out of the system. “To some degree, New Zealand is a canary in the coal mine,” said Kelvin Davidson, chief property economist at CoreLogic in Wellington. “It’s a test case for a central bank to push up rates as house prices are soaring to deal with inflation.”Its capacity to keep Covid-19 in check for much of the pandemic led to less of a downturn in New Zealand than other economies. Relatively strong growth — and a change in monetary policymakers’ mandate so that they must counteract any risk that house prices pose to financial stability — meant the central bank was among the first to act on signs the economy is overheating.The impact of those rises, which have been accompanied by tighter lending conditions such as narrowing the amount of high-risk mortgages with steep loan-to-value ratios, are being keenly felt in the housing market. Estate agent Barfoot & Thompson think the volume of sales will fall to around 60 per cent of the levels seen last year. “House prices in New Zealand are tumbling and all signs point to a further deterioration in the months ahead,” said Ben Udy, of Capital Economics. He now expects the peak-to-trough decline in house prices to hit 20 per cent, double his previous prediction. But even a 20 per cent decline would only take house prices back to 2020 levels. The real risk to the New Zealand economy is that households slash spending dramatically to protect the wealth that the housing boom and low rates helped create. Shamubeel Eaqub, an economist with Wellington-based Sense Partners, has calculated that housing wealth has increased by NZ$460bn, or $295bn, during the pandemic. New Zealand’s gross domestic product in 2021 was NZ$350bn.New Zealand is a particular example of an economy where “consumers are more sensitive to house prices than they are in other places”, said Udy. With central banks now raising rates across the globe — and expected to tighten further over the coming months — a big question is whether other markets will follow New Zealand down. Estate agents remain optimistic. “While markets will slow, I don’t think we’re going to see price falls globally. The rate of price growth will just dip and soften over the course of the next few months,” said Kate Everett-Allen, partner and head of international residential research at Knight Frank.

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Economists are more sceptical. Innes McFee, chief global economist at Oxford Economics, saw a period of “very weak price growth” ahead, as higher rates raised mortgage costs. Vicky Redwood, a senior economic adviser at Capital Economics, thinks prices will fall in the UK, Australia, Canada, Sweden and Norway, along with New Zealand. Some New Zealanders see a silver lining from the bursting of a housing bubble that has left many struggling to get on to the property ladder. House ownership is at its lowest level since the 1950s, according to Eaqub. He noted that around 4 per cent of New Zealand’s tax revenue is spent on housing assistance. Tobias Otting, a 29-year-old consultant with CoreLogic who is looking to buy a house in Wellington with his partner, has witnessed a stand-off between sellers trying to hold prices firm and buyers looking to price in the impending dip. “Reality is setting in. It’s a buyer’s market now,” Otting said. “We have the luxury of being patient.” More

India has criticised developed countries for overcharging for vaccines and overfishing the high seas in a dramatic intervention that could torpedo agreements in those areas at the World Trade Organization’s ministerial meeting.Piyush Goyal, India’s commerce minister, took the unusual step of publishing his remarks to fellow ministers in closed-door sessions in Geneva on Tuesday.Delhi has long argued for an intellectual property waiver that would allow poorer countries to make cheap copies of western vaccines without paying royalties. But it worked on a compromise with the EU and US that would allow governments to issue compulsory licences and compensate patent holders. But Goyal tore into that agreement, telling developing countries they should “not get conned” by a “suboptimal” deal. “Where a vaccine in India gets produced for $1.50, many parts of the world are paying $38-$40 plus. Some of you have received donations, valuing the vaccine at $38 or $40 and making it out to be such a big favour to you. “So, my own sense is that what we are getting is completely half-baked and it will not allow us to make any vaccines. They have no intentions of allowing therapeutic and diagnostics and . . . they try to say that we are the cause for its collapse.”

Charities have also criticised the compromise as insufficient. Developed countries say the issue is not the availability of vaccines, but the reluctance of people to take them. “This is simply industrial policy for India, allowing their generic pharmaceutical companies to make money,” said one diplomat in Geneva, who declined to be named.At a separate meeting discussing how to reduce overfishing by cutting subsidies, Goyal said developed countries were responsible for the problem. “Advanced fishing nations own the responsibility of the damage caused to the global fisheries wealth especially in the high seas which are also the common heritage of humankind,” he said.“The concern of the small number of fishermen [in some countries] prevails over the livelihood of 9mn fishermen in India. This is completely unacceptable! And that is the reason India is opposed to the current text,” he added. “Fish is an inseparable part of Indian mythology, religion and culture.”He said developing countries should be “cautious while we mortgage away our future and the future potential of our poor people to grow”.Goyal demanded a 25-year exemption for India and other developing countries from controls, and a permanent exemption for “artisanal fishermen” fishing up to 200 nautical miles from shore.Despite his claims, almost all the 164 WTO members are ready to sign up to the text after 21 years of talks, officials say. Fishing subsidies are estimated to be $35bn worldwide, of which $20bn directly contributes to overfishing. The UN says the proportion of stocks fished at biologically unsustainable levels increased from 10 per cent in 1974 to 34.2 per cent in 2017.Isabel Jarrett, a fisheries expert at the Pew Charitable Trusts, said a deal that would be implemented swiftly was urgent. “Fish stocks do not have another 25 years,” she said.Along with South Africa and Indonesia, India is also opposing the extension of a moratorium on customs duties on digital products. It ends when the meeting does on Wednesday and without extension would allow governments to put levies on film downloads, software updates and the like.Some diplomats believe India is playing tough to get concessions in other areas, including agricultural subsidies. The WTO has tried to keep talks separate but a spokesman said last night that could change. “A call may be made to tell everyone to put their cards on the table. They’re not at that stage. I’m not suggesting that they will do it,” Daniel Pruzin said. “But as the clock ticks down, as the seconds go by, you know, some creative solutions and creative methods may be needed in order to help achieve some breakthroughs.”  More

Hong Kong’s fund managers have called on the government to reopen the city’s borders and warned of a “permanent” loss of talent even as Covid-19 cases rose in the Chinese territory. Sally Wong, chief executive of the Hong Kong Investment Funds Association, which represents global and local groups that oversee more than $52tn in assets under management, made the plea as the financial hub’s outgoing leader Carrie Lam said on Tuesday that she would “not budge” in the face of industry pressure. Hong Kong has been tied to Beijing’s Covid elimination policies since the start of the pandemic, with incoming travellers subject to at least a week of hotel quarantine. Despite the restrictions, the city has recorded hundreds of cases a day, with 737 new infections recorded on Monday. The policies have cut off the city from the rest of the world, sparking an exodus of residents and causing the economy to contract by 4 per cent in the first quarter compared with the same period last year. A net loss of about 130,000 residents was reported since the beginning of this year.Related read: Several big Chinese investment banks in Hong Kong have reduced staffing in their investment and equity capital divisions to cut costs during the city’s drought of initial public offerings, according to bankers.Has your work been affected by border closures in Hong Kong? Share your experience with me at [email protected]. Thanks for reading FirstFT Asia and here is the rest of today’s news — EmilyFive more stories in the news1. Coinbase to cut almost a fifth of staff The Nasdaq-listed exchange said it would cut 1,100 employees as it grappled with a slowdown in trading that has forced it to abandon its growth plans. Bitcoin has lost more than 60 per cent of its value since November, when it hit an all-time high almost $69,000.Explainer: Why are crypto lenders central to the digital asset market?2. Pentagon bankrolls rare earths plant The US Department of Defense has signed a $120mn deal with Australia’s Lynas Rare Earths to build one of the first US domestic heavy rare earths separation facilities, part of Washington’s push to counter China’s dominance of critical mineral supply chains.3. Blows to Europe’s gas supplies sparks price surge Europe’s gas supplies suffered a double blow on Tuesday after a major US liquefied natural gas export terminal said it would be offline for at least three months and Russia said it would cut flows through a key route to Germany.4. Biden to visit Saudi Arabia and Israel US president Joe Biden will meet Saudi Crown Prince Mohammed bin Salman and leaders from almost a dozen countries on a trip to the Middle East next month, Saudi Arabia and senior administration officials have said.5. Bloomberg seeks staffer China says was released on bail US media group Bloomberg said on Tuesday it had been unable to contact a Beijing staff member detained by Chinese security services in 2020, despite government claims she was released on bail six months ago.The day aheadChina economic data May figures for industrial production and retail sales, which are both expected to show a contraction, are set to be released today. (Bloomberg) Nato defence meeting Ministers gather in Brussels for a two-day meeting. The event will include a working dinner to which representatives of Finland, Georgia, Sweden, Ukraine and the EU are invited. A separate meeting of the Ukraine Contact Group, hosted by the US, will take place at Nato headquarters.Federal Open Market Committee interest rate decision US central bankers will convey their forecast policy path in an updated “dot plot”, which maps out individual interest rate projections as part of a broader set of estimates about the economic outlook.Join leaders from FTX, Monzo, JPMorgan and more on June 16-17 from the FT Future of Finance stage at the heart of Europe’s leading tech festival, The Next Web. Register for your free digital pass today.What else we’re readingIs ‘Made in Japan’ back with the weaker yen? A tight labour market and rise of production outside the country by companies may limit the “reshoring” of jobs, writes Kana Inagaki. Companies are unlikely to unwind the global production bases they have spent decades finessing to reduce their exposure to currency volatility.Alibaba and Tencent’s darkening clouds The lacklustre growth has defied expectations that cloud computing could transform the Chinese tech groups in the way that Amazon Web Services revamped the US ecommerce giant and Azure bolstered Microsoft. Competition from politically favoured vendors are adding to the pressure.Farewell to the servant economy First there were Uber drivers who would come to your door at the push of a button. Now there are people who will bring you a packet of biscuits and ibuprofen. “On-demand” services might have made people feel wealthy, but the model is in jeopardy, writes Sarah O’Connor.Related read: A rise in wages is structural, with labour set to take more corporate income, writes Ellen Zentner, Morgan Stanley’s chief US economist. For more on the world of work subscribe to the FT’s Working It newsletter. Economists Exchange: Christopher Pissarides The problems in labour markets look very different from when the former adviser to the Cypriot and Greek governments began his academic career in the 1970s, plagued by mass unemployment. But for Pissarides, who won the 2010 Nobel Prize for his work on friction in labour markets, many of the answers are similar. Inside the risky bets that unravelled Celsius’ crypto lending When asked by one user why he had so many enemies, Celsius Network co-founder Alex Mashinsky boasted: “because I am winning and giving it all to my community”. Days later, his crypto investment firm is in crisis after it blocked customer withdrawals, a move that shook crypto markets.MusicMembers of the superstar K-pop band BTS will take a break from working together. The band’s management company Hybe, said it is not a “hiatus”, but rather that the members “will be focusing more on solo projects at this time,” a statement said. Last year, a K-pop boom drove South Korea’s entertainment listings to a record high. (AP, FT)

Members of BTS ‘will be focusing more on solo projects’, the band’s management company said © Jordan Strauss/Invision/AP More