OCA - Oceania Group - retirement villages

[bull....]

The cost of building a new home is increasing at its fastest rate on record, due to persistent labour and material shortages
The annual growth rate also hit an all-time high of 7.7 percent, eclipsing the previous record set in the first three months of the year.

https://www.newshub.co.nz/home/new-z...nual-rate.html

does anyone know if they are raising there unit selling prices greater than 8% ? this yr

[allfromacell]

The cost of building a new home is increasing at its fastest rate on record, due to persistent labour and material shortages
The annual growth rate also hit an all-time high of 7.7 percent, eclipsing the previous record set in the first three months of the year.

https://www.newshub.co.nz/home/new-z...nual-rate.html

does anyone know if they are raising there unit selling prices greater than 8% ? this yr

They've only guided that sales, enquiries, margins and captial gains are all up on last year for this first 2 months of FY23 but not by how much.

Building enquiries are slowing down significantly but the retirement sector will keep building, this reported slowdown will help ease capacity issues. It's also important to remember OCA have locked in building contracts for a few more years and so far have not mentioned any issues with problems sourcing materials or contractors.

https://www.interest.co.nz/property/...910-style-bust

[Muse]

The cost of building a new home is increasing at its fastest rate on record, due to persistent labour and material shortages
The annual growth rate also hit an all-time high of 7.7 percent, eclipsing the previous record set in the first three months of the year.

https://www.newshub.co.nz/home/new-z...nual-rate.html

does anyone know if they are raising there unit selling prices greater than 8% ? this yr

sure, but I'm feeling confident we have passed 'peak' building material inflation. With a drop of 70-80% home building inquiries, that can only flow through to housing consents and future home builds. A drop like that, particularly after new building material infrastructure has been put on place (new gib factory, new red stag timber mills), could very well lead to building product deflation, along with a surge of available builders. That has a lot of ramifications on its own for the country and other industry, but probably a welcome development for the RV industry, either real or perceived by the market.

[Habits]

The cost of building a new home is increasing at its fastest rate on record, due to persistent labour and material shortages
The annual growth rate also hit an all-time high of 7.7 percent, eclipsing the previous record set in the first three months of the year.

https://www.newshub.co.nz/home/new-z...nual-rate.html

does anyone know if they are raising there unit selling prices greater than 8% ? this yr

Just six weeks ago QV via RNZ were telling us the construction cost had gone up 21 percent over the year.


Average cost of building 3-bedroom home nearly 21% higher than a year ago - QV | RNZ News
https://www.rnz.co.nz/news/business/...-a-year-ago-qv

Can we start seeing a drop in the inflation rate. I noticed that fuel prices at the pump were down about 10 percent which will feed into Q3 cpi if it is sustained. Fingers crossed

[Maverick]

I was playing around with some numbers today which may be of interest to some here.
The point of the exercise is to see if there is correlation to the hugely growing village + corporate costs that then leads to a lagging increase in new build development profits. The idea is that as OCA increases its build rate so does its immediate front footing of the costs to do so but then they reap the downstream new sales profit ( and follow on then to DMF profit). They have increased their build rate from 200 to 300 over the last year.

Obviously the short 5 years OCA has been building is not enough data to draw from so I ran the same exercise with another company I track closely, SUM - we know historically it has been a highly successful model. SUM is very suitable to compare as they too have increased their build rate, have loads of data and are a very simple model to understand.

SUM lump their operating expenses into one amalgamous number whereas OCA breaks theirs into 3 sets.( care, village and corporate) To compare apples with apples as much as I can I have combined the OCA village and corporate costs but left out their care costs ( the care accounts are a very different beast needing to be treated completely separately) . Note that the SUM figures do include their care costs albeit much smaller- I couldn't be arsed stripping those out.

I don't think anything lifechanging can really be drawn from the comparisons but they are really interesting to me that they are so similarly big spenders as far as increasing costs YOY and how significantly covid messed with them both
Note that SUM report before OCA so SUM`s FY2020 should be compared to OCA`s FY2021.

To me the interesting conclusions that can be drawn are;
A.OCAs often derided “ rampant and out of control costs” are actually lesser than SUMs. ( I don't believe for 1 second that either company hasn't got costs fully under control - I say they are spending money to make money, and bigger the build rates and targeted acquisitions is the only fast way forward).
B. The 5 years that OCA has operated under appears to have been a very tumultuous and unlucky period given it has mostly been during covid. SUM has experienced the identical drop and rebound of data over exactly the same time frame. Prior to 2018 we can see on SUMs chart things are pretty smooth.
C. It appears the recovery and catchup of new sales profit is well under way for SUM but not so much so for OCA.

I put this slower recovery for OCA to the timing difference of being able to sell SUM villas quickly as you build whereas delivering apartment blocks is much slower and sales are held up until the entire tower is fully completed. Oca by my calcs has a very large , record number of completed apartments currently that are being sold down now and over the next 12-18 months This is one of the key drivers for a very large jump in this year's FY profit. I'm saying the recovery for OCA is slower than SUM by nature of unit types being delivered.

I see high corporate spending by both SUM and OCA is key to the future growing profit as demonstrated by the SUM graph. The high corporate spending now by both OCA and SUM will keep the underlying profits growing accordingly in the years to come. , that leads onto DMF increases , resales and so on.

Now lets see if I can post the graphs ok….im usually sh*t at stuff like this.

[bull....]

They've only guided that sales, enquiries, margins and captial gains are all up on last year for this first 2 months of FY23 but not by how much.

Building enquiries are slowing down significantly but the retirement sector will keep building, this reported slowdown will help ease capacity issues. It's also important to remember OCA have locked in building contracts for a few more years and so far have not mentioned any issues with problems sourcing materials or contractors.

https://www.interest.co.nz/property/...910-style-bust

that would be an incredible feat in this environment if oca has locked in fixed price build contracts for the next few years. wonder if the builder will be around to honour it ?

[justakiwi]

Excellent post as always Mav. Thank you!

I was playing around with some numbers today which may be of interest to some here.
The point of the exercise is to see if there is correlation to the hugely growing village + corporate costs that then leads to a lagging increase in new build development profits. The idea is that as OCA increases its build rate so does its immediate front footing of the costs to do so but then they reap the downstream new sales profit ( and follow on then to DMF profit). They have increased their build rate from 200 to 300 over the last year.... <snipped>

[winner69]

Mav - from Summerset Annual Report .... haven't looked at Oceania

The cost of retirement units includes directly attributable construction costs and other costs necessary to bring the retirement units to working condition for the irintended use. These other costs include professional fees and consents, interest during the build period and head office costs directly related to the construction of the retirement units.

[Grimy]

Thanks Maverick. Always look forwards to your posts, and learn more with each one.

[Beau]

Thanks for putting in the time and sharing Maverick much appreciated