Its all about supply and demand. BNZ believe there are circa one million Kiwi's presently overseas. One presumes the majority of those still hold N.Z. residency and passports and are entitled to return at any time. Forgetting about how the Govt might tinker with immigration requirements for new entrants for a minute think about that number and then take a quick glace around the world on the geopolitical front and N.Z. looks increasingly attractive by the day ! OECD report says we're one of the most lightly taxed countries in the world too !
No capital gains tax for one thing. AKL market could indeed go sideways inflation adjusted for a few years, maybe not even keep up with inflation so reduce gradually in real terms. That's not a concern for SUM who have six years land supply on hand. Any temporary dip could actually be good for the company as it gives them an opportunity to acquire more land at much more attractive prices.
(Bare land has historically had a very high beta in regard to changes in the real estate market overall). Long term a temporary dip in real estate prices could be a very good thing...why do you imagine Julian Cook just organized an expanded debt facility ? Take advantage of any attractive land acquisition opportunities is the obvious answer.
No issues with most of the country but returning to the Auckland market which seems a bone of contention with a lot of folk.
Fact is building companies are only building just over (from memory), 10,000 homes a year and circa half the immigrants, (35,000) per year want to live in Auckland. We're short about 4,000 homes per annum according to what I've read. Until that's fixed, which won't happen anytime soon as the industry is basically at peak capacity already there's no let up in the demand supply imbalance.
SUM are building in other parts of the country as well as Auckland. Some people get myopic vision and think Auckland's problem is symptomatic for the company generally.
By my estimate SUM is presently trading at $5.17 at only 16.15 times FY17 underlying earnings. That's extremely cheap for this sector let alone for the company that's achieved the highest compound growth rate average for this sector over the last 5 years (48% per annum). SUM housing and care is a needs based supply. Massive demographic tail winds for this sector for at least the next 25 years by which time I will have talked Julian Cook into allowing me to have two dogs in my waterfront retirement unit at Hobsonville when I move in at 80 :) (God willing I live that long).
Disc: Watching this one closely, already my #1 investment position on the NZX but if it drops much more I might have to consider doing a mini Couta1 :D