SUM - Summerset Group

[Beagle]

You know retirement units are cheaper than houses right? (generally)
ie the old folk who own there houses with little or no debt can easily afford a unit, even if the unit goes up in price and their house price goes down

In the VAST majority of cases that's true. Retirement village operators generally try and price the units at an average of about 75% of the price in the prevailing suburb in which they're based BUT its well worth noting that most villages offer quite a variety of options with prices from as low as 50% of the surrounding area prices to over 100% depending upon what people want. Most people free up a significant amount of capital as part of the natural downsizing process and that's part of the joy of the experience, having some more capital to either spend and enjoy life or invest and enjoy life from the investment proceeds !
I reckon its a great thing that some people who have made no significant provision for retirement can enjoy a much better lifestyle in terms of both enjoying a supportive community and having some spare money to spend than they otherwise would have potentially lonely and more isolated in the suburbs somewhere remaining in their own home.

[King1212]

very nasty articles around NZ herald regarding slow down of property market as labour intended to build cheap housing..this will certainly negatively affect property sector and retirement sector.

[Beagle]

very nasty articles around NZ herald regarding slow down of property market as labour intended to build cheap housing..this will certainly negatively affect property sector and retirement sector.

Good luck with finding the builders and other tradies to complete the building jobs "cheaply"

[trader_jackson]

Good luck with finding the builders and other tradies to complete the building jobs "cheaply"

They are going to get it from immigration I thought? oh wait thats right...
(nearly 1 week into this shambles)

[Beagle]

They are going to get it from immigration I thought? oh wait thats right...
(nearly 1 week into this shambles)

Yeah lol...here's what Mike Hosking thinks. http://www.nzherald.co.nz/business/n...ectid=11936036

[dobby41]

very nasty articles around NZ herald regarding slow down of property market as labour intended to build cheap housing..this will certainly negatively affect property sector and retirement sector.

Saner minds have suggested that 100000 houses over 10 years won't make a significant difference to the price of the existing stock.
Have a read of this - usually quite a sane commentary
https://westpaciq.westpac.com.au/wib....2017_NZWC.pdf

[dobby41]

Yeah lol...here's what Mike Hosking thinks. http://www.nzherald.co.nz/business/n...ectid=11936036

Mike is always good for a laugh.
Take anything he raves about with a grain of salt - remember he is a commentator not a journo.

[Beagle]

Mike is always good for a laugh.
Take anything he raves about with a grain of salt - remember he is a commentator not a journo.

Agreed. I don't think Labour's plan's to build 100,000 affordable homes, (even if they somehow manage to achieve this election promise and even if those homes really are affordable) will have any material affect on the price of existing stock. Remember that, (sticking with the saner minds) according to well respected BNZ economist Tony Alexander there are over 1,000,000 Kiwi's presently living overseas and no amount of immigration fiddling can stop those who want too from coming back home and I think with all the unrest in the world that's ever increasing many will do exactly that in the years to come ! Where are they going to live...

The other thing is nothing will stop the huge tsunami of baby boomers approaching 70+ from wanting to enjoy their retirement years in a comfortable supportive caring community. SUM's units differentiate themselves from RYM by being quite a bit larger in general. I am sure if there's some compression between the price of houses and those of retirement units so they become slightly less affordable smart operators like SUM will quickly adapt their business model to suit.

[trader_jackson]

Agreed. I don't think Labour's plan's to build 100,000 affordable homes, (even if they somehow manage to achieve this election promise and even if those homes really are affordable) will have any material affect on the price of existing stock. Remember that, (sticking with the saner minds) according to well respected BNZ economist Tony Alexander there are over 1,000,000 Kiwi's presently living overseas and no amount of immigration fiddling can stop those who want too from coming back home and I think with all the unrest in the world that's ever increasing many will do exactly that in the years to come ! Where are they going to live...

The other thing is nothing will stop the huge tsunami of baby boomers approaching 70+ from wanting to enjoy their retirement years in a comfortable supportive caring community. SUM's units differentiate themselves from RYM by being quite a bit larger in general. I am sure if there's some compression between the price of houses and those of retirement units so they become slightly less affordable smart operators like SUM will quickly adapt their business model to suit.

You reckon this government, who also promised to hold the retirement age at 65 (which is positive for the industry), is going to change the fundamental laws of time and stop people getting old??

(along with the lofty $20 an hour target, cutting corporate tax to 25%, building 100,000 homes in 10 years, free uni for first years, and Winston himself walking down the pike river shaft - I look forward to seeing all these happening starting 1 Jan next year!)

[Lewylewylewy]

Personally, I don't think that SUM's income from operations will suffer from a drop in property prices. They'll keep trucking. I say this because I think it's a "needs" based product / service, rather than a "want".

I do however, think that it would effect the value of the business. Obviously a business owning a lot of property will be worth less if the value of property drops. Therefore the SP will be effected. Also, growth could be effected, because [a] they're a business that grows their property portfolio, which is easier to do if property values keep going up (think leveraging gains) and [b] if property values are growing, they can grow the rates they charge. I think they can still grow the business through increased demand (the figures from Stats NZ show an increase in demand should happen for decades to come), but without property prices increasing, they perhaps can't grow their pricing.

I'm not saying that SUM is a golden purchase with no risks, we now have a govt with a less clear agenda, power struggle risks and they also seem to be more focused on making policy based on feelings, so I'm worried things won't be carefully thought through - they've already flip flopped on the water tax (thank god!).

That said, if I had spare cash, I would definitely top up at these prices. I am also waiting for next year's report to ensure that they can be profitable with flat pricing, because for me the annual reports were difficult to separate out confidently to work out where the money was definitely coming from.