Huge prices being paid seemingly for the properties in a market which has gone backwards 10% to 15% :
39 Glover Rd - $4.2m vs CV $2.95m
43 Glover Rd - $4.2m vs $3.9m
Do they know what they are doing?
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Residential real estate of course has value in housing the people. We have to live on land. However in NZ government regulatory, tax and monetary policy give it an advantageous appeal to investors seeking to accumulate a pension or other investment fund. So it is debatable whether providing the people somewhere to live is the main objective in NZ.
I hope so. I am a shareholder! Perhaps in conjunction with their existing site, they see opportunities to unlock even greater value with the addition of the new sites.
I would be happy to be a neighbour of those two sites as I imagine they may be on OCA’s wish list.
Determining intrinsic value is as much about accuracy as anything else is it not?, price to assets is one of the simpler ways to look things, the probability of getting it wrong is lower than other methods imo.
Not saying cash flows should not be used, but pricing based on future cash flows is not much help if you get it wrong, and when you have to make future assumptions the probability of error is going to increase.
IMO asset value can be used as a cross check for consideration.
I think the latter are indeed on a growth curve in this country.
I wonder if anyone will venture into a "Build to Rent" style development restricted to over 70s but providing some limited but reasonable supporting common amenities in a controlled and secure environment? None of the Kianga Ora type issues with unresponsive nutter tenants/neighbours as they would be exited promptly. So no ORA/DMF but a rental level reflecting a decent return on investment. May be no or very limited care facility aspect as that would not be the objective.
It seems to me that with property, ppl have many different reasons for buying it, and are willing to pay prices that may not represent investment valuations based on say income from rent. Also depending on where you are in life is a factor, ppl who are at the point in life where they are financially well off probably are happier to pay a higher price to get what they want where they want to be.
I'm not necessarily sure it has amazing user value over and above a store of wealth, surely you have the same user value from a property you rent, and in some cases renting may be the more cost effective method.
And along the store of wealth front, there are a lot of ongoing frictional costs, rates, insurance, maintenance.
Home ownership is probably more a cultural idea we have as much as anything.
Ok think of it this way.
There is a business with 10 million dollars worth of gold, and all that business does is hold that on their balance sheet. Let's say for the purposes of the example there is no way of acquiring a controlling interest, and the business will never sell the gold to distribute the cash.
Someone valuing this business on a NTA basis would say that it's worth $10m. But in 10 years, the business will still have the exact same amount of gold.
What would you pay for a 10% ownership of the business?
[QUOTE=ValueNZ;1042490]Ok think of it this way.
There is a business with 10 million dollars worth of gold, and all that business does is hold that on their balance sheet. Let's say for the purposes of the example there is no way of acquiring a controlling interest, and the business will never sell the gold to distribute the cash.
Someone valuing this business on a NTA basis would say that it's worth $10m. But in 10 years, the business will still have the exact same amount of gold.
What would you pay for a 10% ownership of the business?[/QUO
They would need to pay holding costs and then its a depreciating asset !
I wouldn't pay a dollar for that theoretical gold holding business. It is completely valueless, the owner of that 10% stake receives nothing at all from the business in the ten years and will never see the gold liquidated.
I laid out that example in a way that isn't necessarily realistic, but it serves a purpose. Much like the gold company, Oceania will not liquidate it's assets, so therefore it makes no sense to value OCA based on it's net assets. The difference is that OCA owns productive assets, unlike the gold company. The value of OCA must be therefore be derived from the cashflows from the productive assets and not what you might get if you liquidated the business.