Retirement village operators

[Newman]

NZ Herald: Falling house prices and rising building costs have prompted a $2 billion developer to stall plans for a controversial new eight-building $300 million high-rise Auckland retirement village.

[Balance]

NZ Herald: Falling house prices and rising building costs have prompted a $2 billion developer to stall plans for a controversial new eight-building $300 million high-rise Auckland retirement village.

First real admission by the sector about falling house prices impacting on sector values.

Watch for massive valuation downgrades in the next 3 years.

[bull....]

First real admission by the sector about falling house prices impacting on sector values.

Watch for massive valuation downgrades in the next 3 years.

and massive cash issue calls by some i reckon due to coming cash flow crunch

[Brain]

NZ Herald: Falling house prices and rising building costs have prompted a $2 billion developer to stall plans for a controversial new eight-building $300 million high-rise Auckland retirement village.

To me it means less supply for a product which is a necessity for many.

[bottomfeeder]

First real admission by the sector about falling house prices impacting on sector values.

Watch for massive valuation downgrades in the next 3 years.

Not so much values coming down, but costs rising exponentially. $300 mill now going to cost $450 mill. Must have a flow on effect into existing building value.

Value only drops if you are a desperate seller, or new stock easy to replace at low values. I would really be concerned if costs of building and land was going down. So I say hang in there.

[bottomfeeder]

and massive cash issue calls by some i reckon due to coming cash flow crunch

Sure way to drop SP, is to have a capital raise in uncertain times. I feel they will either use borrowings or reduce dividends temporarily. Watch care prices start to increase.

Only stupid management will be like possums caught in headlights, instead of being proactive in covering costs and reasonable profit.

[Balance]

Not so much values coming down, but costs rising exponentially. $300 mill now going to cost $450 mill. Must have a flow on effect into existing building value.

Value only drops if you are a desperate seller, or new stock easy to replace at low values. I would really be concerned if costs of building and land was going down. So I say hang in there.

Escalating land prices have been the single biggest contributor to rising property prices, easily outpacing rising construction & building costs.

Land prices are now falling rapidly - 35% down in some parts of Auckland and there are now mortgagee sales taking place.

Factor that into ‘replacement’ costs.

[Balance]

Meanwhile …

https://www.nzherald.co.nz/business/...HQOJMNZOHFQQ4/

A long-awaited review of the much-complained-about Retirement Villages Act is underway, potentially improving the lives of more than 40,000 residents, overhauling the financial model and demanding places meet healthy homes standards.

Te Tūāpapa Kura Kāinga The Ministry of Housing and Urban Development announced the law probe this week into the multi-billion dollar sector following widespread calls for change from Consumer NZ, the Retirement Commissioner, the Retirement Village Residents Association,

Owner/operators keeping 20 to 30 per cent of retirees’ capital via deferred management fees will be one area under the spotlight.

[Snoopy]

The only way I can see your $1m house incremental price rise over the next ten years coming is through massive wage inflation (forget about small businesses grizzling about paying $20 per hour minimum wage, it will have to be $40) which means $12 lattés (starting price) for your morning fix. Before the nationwide (except Christchurch) rising of property prices in 2019 and the subsequent price stoking of 2020 I had hoped a decade of zero to no property price inflation might sort things out. But the reserve bank will not allow 7.5% wage/price inflation every year for ten years, and even Jacinda won't oversee a minimum wage of $40/hour.. So I am afraid the only option to correct things is a property crash. By that I mean a minimum 30% price collapse and probably more. I know that those of you who live in Auckland can't see it, but believe me it is coming because the population of NZ won't tolerate being priced out of a home forever. I invite you to contemplate what that might do the balance sheets of those over-leveraged property developers that call themselves 'retirement villages'.

Ok I feel better now. back into my kennel.

Pretty prescient October 2020 rant from me. I obviously missed my career calling. I should have been a chief bank economist.

bull is continuing to stir

major event next year add's big risk to sector

Review of Retirement Villages Act begins in 2023

At a high level, the review is set to consider whether the current Act and all its parts remain fit for purpose

https://www.hud.govt.nz/news/review-...egins-in-2023/

And having had their retirement sector investments (and house buying ambitions?) 'beaten up', investors have regrouped into generational cohorts, turning on each other.

That's true. Boomers rode the crest of a wave. The wealthier boomers inheriting estates after Estate Duties were set to zero, then gift duties were done away with. Then interest rates fell and property prices continued to surge. The income multiples needed to buy a house are much higher than long term averages.

Boomer tax

I am feeling a bit smug, having never understood the fundamentals behind the retirement sector enough to be brave enough to invest in it. Of course that has seen me miss out on the massive gains over the last 20 years, so I don't know why I am feeling smug. Being scared of Ryman has cost me big time! However, my ignorance and foolishness' for not investing in this sector has seen me today as an 'independent observer' watching the train wreck from the side of the tracks. One of the principal reasons keeping me out was that I did not see a similar ramp up in retirement village shares in Australia, a country with similar demographics to NZ, and I wondered why. I came to the conclusion that the retirement village sector in NZ, from an investor perspective, was just an extension of the kiwi fascination with the domestic property ponzi. And maybe I will be proved right about that. Those thoughts didn't help me get rich though.

I wrote this post thinking I would call for some Christmas cheer and an least a season hiatus to the investor wars. However, I think I have probably just stirred up a bit more trouble but putting my own oar in where it wasn't wanted. Sorry about that. Merry Christmas to all retirement sector investors anyway.

SNOOPY

[Rawz]

Wow Snoopy, impressive stuff. Oracle of Sharetrader?