OCA - Oceania Group - retirement villages

[Waltzing]

Mr B is stating the potential tipping point. "huge state owned apartment blocks"

If rental properties are to have a residential classification for tax purposes then this class of asset is now to be removed from the market side of the system.

If this fails to achieve the desired effect other options will come next.

For those with off shore occupations it may well be that only one asset is held here in the form of a house only dwelling in NZ.

All other assets will be moved into purely commercial assets and for all of your investors this is surely good news because you have chosen to invest in public companies which will not be effected by these policies.

Its doubtful that these policies will be extended in way to commercial enterprise.

Some other countries provide wonderful places to reside with lakes in summer that are cleaner than NZ, not sure about some south island lakes which may be the purist but around here totally polluted.. Its a big world.

[Baa_Baa]

Wonder what Maverick is thinking seeing the value of his massive holding in OCA shrink under the weight of Labour's draconian and punitive tax extremism ?

I am not sure I can be bothered applying for shares under the retail offer. Disc: I let some more OCA shares go today. It feels like the tide is going out on this sector (in the short term at least).

I'm not seeing the direct linkage of the punitive rental home investor policy to OCA's situation, unless it depresses the overall property market valuations (which OCA haven't factored the rises in yet), but on reflection I'm not applying for shares offered that I can get on market for 1 cent more.

In any event as I stated many times before, this company for me is a long game and I'm happy with my 'relatively' large holding. I'm not about to flip to momentum trading OCA, except when something like Covid comes along and the market serves up a sub $0.40 share buy price!

[James108]

Beagle i don’t believe rents will go up that much although they will likely go up some. But rents are driven by supply and demand not what landlords wish they could charge, in Auckland we are finally building more houses than needed by population increase, the AUPOIP has really helped with this. Furthermore rents literally can’t increase beyond what people can afford. If investors aren’t getting a suitable return on residential property investment maybe they should pay less for that property, maybe that is even the intended outcome. That residential property falls in value...

If you agree that property prices need to fall at some point policy/tax needed to be introduced that made landlords upset. I favoured a land tax and corresponding income tax reduction even though it would have hurt my retirement village shares. Although this change isn’t nearly as good props to labour for surprising me and having some political courage, national certainly don’t have any.

[Beagle]

Landlords I know of are talking $120-$150 per week more phased in over 4 annual incremental steps to cover the extra costs of being in business, in addition to whatever other extra charges they are liable for with ever increasing insurance and rates bills and other compliance costs like extra insulation. The core of Labour's support group are going to get absolutely hammered by Labour's own policies. Talk about shooting themselves in the foot. Accommodation supplements and working for families benefits will have to increase substantially and the ever increasing payments to moteliers will get dramatically worse...the net tax revenue from this dramatic new policy will be minimal, if any, in my opinion.

The net return on a typical Auckland house taking all costs into account including deep cycle maintenance is already pitiful and often well under 3%.

In terms of OCA, there is no doubt a significant number of landlords will sell out over the next 4 years which will suck a fair bit of wind out of the property market and to some extent this will affect OCA. One good thing is this change makes for a very clear line of demarcation between the political parties so Labour's radical upheaval of the tax system could be easily be reversed by a National lead coalition.

With OCA, they really haven't repriced their units at all for the ~ 20% increase in the national average price in the last year so they are arguably better positioned than their peers to withstand the effects of this tax onslaught.

I like the new OCA acquisitions but they couldn't have come at a worse time and sentiment at the minute is very negative. Maybe I will be less grumpy in April when the new retail issue funds are due ?, maybe not.

[Panda-NZ-]

In terms of OCA, there is no doubt a significant number of landlords will sell out over the next 4 years which will suck a fair bit of wind out of the property market. One good thing is this change makes for a very clear line of demarcation between the political parties so Labour's radical upheaval of the tax system could be easily be reversed by a National lead coalition.

Interest rates are near 0% and all the nonsense ideas like "First home grants" and kiwisaver withdrawals are allowed so a mild moderation to no change is more likely.

[patrick]

I'm not seeing the direct linkage of the punitive rental home investor policy to OCA's situation, unless it depresses the overall property market valuations (which OCA haven't factored the rises in yet), but on reflection I'm not applying for shares offered that I can get on market for 1 cent more.

In any event as I stated many times before, this company for me is a long game and I'm happy with my 'relatively' large holding. I'm not about to flip to momentum trading OCA, except when something like Covid comes along and the market serves up a sub $0.40 share buy price!

Punitive rental home investor policy!
Only punitive for those who have milked the system and now find huge profits gone.
VERY good decision to remove the deduction.

[Waltzing]

"VERY good decision to remove the deduction.'

and be damned accounting best practise.

No the policy is BAD and the GOVT saw an opportunity to introduce its desired hand against the scales of the market.

Its a failure of market supply and a side effect.

Its a brainless policy that shows they have NO IDEA how to solve the problem but want to promote a POLICY.

MR B is right and usually this type of POLICY comes back to haunt you in historical terms at a later date.

YOU the TAX payer may well now be the back stop for this POLICY.

Yes the profits stop but its YOU the TAX Payer that is now on the HOOK.

Pay up Billions and thats just the start. To fund it the Govt will need to TAX, TAX , TAX.

What will they do with super profits on retirement villages now that "Loop Holes" are the expenses in profit and loss accounts.

They have to stick with this and they cant walk it back.

This introduces the concept that at any time a reclassification of accounting principles in which a market event that distorts a market is acceptable and there is no classification in the profit and loss account that is except from this process.

Everything is now a potential TAX LOOP HOLE.

It goes without saying thats it folks.

[Panda-NZ-]

This pays for the accomodation supplement and first home grant market intervention/kiwisaver abuse started by national.

Investors haven't done much to do their only real job of increasing housing supply.

[Cyclical]

Punitive rental home investor policy!
Only punitive for those who have milked the system and now find huge profits gone.
VERY good decision to remove the deduction.

It's a very good decision if you're a wealthy property investor that actually owns the properties. It's a very good decision if you're a future first home buyer. It's a very good decision if you want to collect more tax (although as beagle points out, the longer term outcome for the government coffers will probably be negative). However, for everyone else, including renters, investors (I'm not just talking property investors), business owners and anyone that actually wants to make a go of things and not depend on the state, it's an absolute shocker in terms of the impact it will have and the message it sends. Just like the ban on oil and gas exploration and complete lack of consultation on that. I actually thought Grant was doing a pretty good job, but not anymore. Remains to be seen if it breaks the ponzi scheme that has allowed them to keep the economy bubbling along this last year...if there are serious repercussions there, then we might actually see this government get the boot next time...but I doubt it, there are too many blind socialists out there fully sold on the story, in the belief the inflection point is nigh.

[Beagle]

Early feedback and mood of the market from the coalface. Significant majority of houses passed in with no bids. Start of a trend, of that I am quite certain.
https://www.oneroof.co.nz/news/39161

I'm calling it now. The tailwinds for retirement villages are over. There are better opportunities out there than this sector and I am glad I only have a very modest allocation, circa ~ 5% to the retirement industry now, all a "free carry" off previous profits.