SUM - Summerset Group

[trader_jackson]

Hey t_j, stop being so sensationalist in saying SUM are well leveraged and using words like toxic in referring to the property market

Probably clouds your judgement and you may muss out on a great opportunity.

Summerset et al are fine and not over over indebted - take a sensible view


and on track to make $130m plus his year = share price much much higher than what it is now

I mostly agree with you that overall that SUM's debt is fine, but that is not to say it can and should be ignored entirely. I also agree that I could be missing out an a great opportunity

I am still of the belief that there are some "serious issues" in the Auckland property market that maybe "exposed" in a couple years time, my hope is things don't turn dramatically bad, and its more of a soft landing.

[winner69]

Nasi - SUM and others don't pay tax

[Lewylewylewy]

I think a drop in property price would effect NTA and therefore the share price. It would also effect leverage, making future development harder. I imagine prices would also drop and therefore profit.

Personally I don't worry about an Auckland price drop, more likely it will stagnate. Though I suppose it could drop under a number of specific scenarios. I just don't think it's likely. It's not something I'm worried about, especially since immigration is so high.

[winner69]

I think a drop in property price would effect NTA and therefore the share price. It would also effect leverage, making future development harder. I imagine prices would also drop and therefore profit.

Personally I don't worry about an Auckland price drop, more likely it will stagnate. Though I suppose it could drop under a number of specific scenarios. I just don't think it's likely. It's not something I'm worried about, especially since immigration is so high.

No need to conjecture - just look at what happens to well run village developer when house prices dont rise - look at this chart linked in context that national median house prices were pretty flat over 2008/2011 (maybe slightly down). Back then was post high net migration and post housing boom driven by be mortgage rates going down - all killed by the RBNZ who started increasing interest rates (RBNZ loves doing boom bust things). Sounds familiar?

RYM and SUM will still OK (more than OK)

The chart - http://www.rymanhealthcare.co.nz/inv...record-results

[Beagle]

Ultra low interest rates right around the globe for the forseeable future. 65,000 people coming to N.Z. every year, the vast majority of which end up in Auckland.

When I bought my first house in 1991 the average Auckland price was 5 times the average family income and I did the sensible thing and bought in a modest suburb so mine was 4.5 times our income. Back then my interest rate was 15%. To the best of my knowledge the banks are using similar debt servicing criteria now as they did 25 years ago so people who are paying a multiple of as much as 8-9 times using finance at 4% probably have payments as a percentage of their income that arn't materially different to what I had 25 years ago.. Its always been hard to buy a decent house in Auckland because its a great place to live !

[Bjauck]

No need to conjecture - just look at what happens to well run village developer when house prices dont rise - look at this chart linked in context that national median house prices were pretty flat over 2008/2011 (maybe slightly down). Back then was post high net migration and post housing boom driven by be mortgage rates going down - all killed by the RBNZ who started increasing interest rates (RBNZ loves doing boom bust things). Sounds familiar?

RYM and SUM will still OK (more than OK)

The chart - http://www.rymanhealthcare.co.nz/inv...record-results

It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

[Bjauck]

Ultra low interest rates right around the globe for the forseeable future. 65,000 people coming to N.Z. every year, the vast majority of which end up in Auckland.

When I bought my first house in 1991 the average Auckland price was 5 times the average family income and I did the sensible thing and bought in a modest suburb so mine was 4.5 times our income. Back then my interest rate was 15%. To the best of my knowledge the banks are using similar debt servicing criteria now as they did 25 years ago so people who are paying a multiple of as much as 8-9 times using finance at 4% probably have payments as a percentage of their income that arn't materially different to what I had 25 years ago.. Its always been hard to buy a decent house in Auckland because its a great place to live !

But to get a deposit for a house today takes a higher multiple of income than in 1991 - so today it helps even more to have a wealthy family who are prepared to help. So we end up with more investors dominating the market compared with 1991 AND probably more foreign investors too. If so many immigrants will be snapping up more homes - is it finally time to restrict (at least existing) house purchases to residents or those who intend shortly to be residents and cut out from the market foreigners resident overseas..

[winner69]

It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

Good old sharemarket sentiment eh - nothing to do with Ryman performance eh

Those that are more richly valued tend to fall the most (great buying as many found out) - esp when the panic starts.

Summerset has less 'demanding' multiples at the moment is a better 'bet' than Ryman (in my view) ......but keep an eye on those charts

[Beagle]

But to get a deposit for a house today takes a higher multiple of income than in 1991 - so today it helps even more to have a wealthy family who are prepared to help. So we end up with more investors dominating the market compared with 1991 AND probably more foreign investors too. If so many immigrants will be snapping up more homes - is it finally time to restrict (at least existing) house purchases to residents or those who intend shortly to be residents and cut out from the market foreigners resident overseas..

You'd probably know better than I on that front but where there is a will there is a way. Few years back we tried to help our eldest daughter into her first home, a very modest do-up 1960's two bedroom unit with 1960's decor in a very modest suburb and it was only $280,000. Would have required a lot of work and a real roll you sleeves up attitude to add value but it would have been a start and we were prepared to write the deposit cheque. They turned their nose up at it as not being good enough and today they continue to regularly bleat about the rent they have to pay, (at a better place of course), and my wife who's a real softie keeps "lending" them money when they get in trouble. I don't ask how much, if any, she ever gets back. Three main points to this story.
1. People have to have the right attitude if they want to get started. Be prepared to go without all sorts of wants and desires for many years to save your deposit, (just like everyone else did when they got started). Gen Y and X seems to be the "now" generations, they want it right now, it doesn't work that way with houses.
2. You don't buy an average Auckland house in an average Auckland suburb as your first home and neither should you have an expectation that you would. Modest units, apartments and very modest houses in modest suburbs are still out there and that's how most people got started, something young people need to keep in mind.
3. Be prepared to put some work into your home. Has the term "sweat equity" been forgotten ?

Suppose I should sheet all this back to SUM SUMhow to keep it on topic. I noticed the other day that units at their new waterfront location in Hobsonville start from mid $400's. If people don't have mid $400's in equity by the time they're 70 what have they been doing with their lives ? Nobody can tell me SUM's more straightforward units aren't affordable even in Auckland ! Lifestyle doesn't look to bad either.
http://www.summerset.co.nz/hobsonvil...village/video/

[winner69]

It's why I prefer to look at underlying profit (as in the chart) as opposed to NPAT. However it was not for the faint-hearted as the SP for RYM took until May 2011 to reach the SP it was at in May 2007, having halved in the meantime

The reported NPAT chart is more impressive - line going up faster

And the real measure of value is Book Value - heck that chart is really really impressive