Retirement Sector Stocks

[lorraina]

Question.
Nana lives on her own and has just had a fall.Took 5 hours before her neighbour heard her cries.
What are you going to do to protect her future safety, when she comes out of hospital.?
Tell her, as her property is not worth so much today, she can either live at home, or come and live with you until property prices go mad again.
You can not really tell her she should have had her fall a year ago.[or can you?]

[Whacc]

Some people should check their facts....
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.

Make no money except for the care EBITDA, development margin, resale gains, and pretty much non-stop DMF.
But sure, aside from that almost no money.

A care suite is also a lot smaller than an ILU in Browns Bay and they were full a lot faster.
Square metre for square metre I bet it's a far more profitable venture.

Yeah, I guess some people should should check their facts.

[kasper]

Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.

Make no money except for the care EBITDA, development margin, resale gains, and pretty much non-stop DMF.
But sure, aside from that almost no money.

A care suite is also a lot smaller than an ILU in Browns Bay and they were full a lot faster.
Square metre for square metre I bet it's a far more profitable venture.

Yeah, I guess some people should should check their facts.

Exactly but don't expect downramping non holders to do so, its just the same negative repetition dished up on a different plate. PS-In nearly all the areas where OCA have facilities the avg house sale price in the given area easily exceeds the cost of an apartment/villa.

[Basil]

Question.
Nana lives on her own and has just had a fall.Took 5 hours before her neighbour heard her cries.
What are you going to do to protect her future safety, when she comes out of hospital.?
Tell her, as her property is not worth so much today, she can either live at home, or come and live with you until property prices go mad again.
You can not really tell her she should have had her fall a year ago.[or can you?]

Step 1 is going to be getting a needs assessment.  Perhaps it was just an isolated trip up and all she needs is a St John medical alarm to wear around her neck ?  If she needs care maybe she qualifies for Govt funded care ?  There's some very nice places with sunny and very spacious premium care rooms for as little as $5 a day.  Could it be that people are asking why bother getting tangled up in a care suite with all the capital losses and lengthy time for the estate to get repaid when premium rooms are so cheap ?

[BlackPeter]

The market sent a big message out in the days following Arvida's pretty good full year result .... pushing the ARV share price down 12% over a few days

The message was plain and simple - the retirement sector is stuffed - its had it years of good times and now its going to have years of not so good times

Always pays to listen to market messages - especially emphatic ones  Winner OCA thread

Its amazing over so many years how the retirement village segment has tracked the housing sector.  Not completely logical because often people make needs or lifestyle based decisions regardless of where housing is at but the correlation between the two sectors is stunning and undeniable.
I reckon all retirement sector investors have to "look forward to" in the foreseeable future is reading an almost endless series of reports in the media about how the real estate market is in steep decline and watching their shares do much the same.

Some people should check their facts.  Average price of an independent living unit in upmarket villages can be very close to the surrounding real estate price.
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.
Press article I read today said sales of $2m+ houses in Devonport had all but dried up.  Hmmm
RYM said in their recent annual report the average price of their independent living units in the Auckland region is $1.4m but the average house price in Auckland is now $1.1m.     RYM's contention is because their villages are generally in upmarket suburbs there is still  good headroom but is that still the case ?

Not disputing the sun will still rise tomorrow but it could be covered by black clouds just like this sector.

I love it when people are trying to rise the fear level in the market by comparing pineapples with apples. Tells you so much about human nature.

Sure - OCA sells some large units with sea view north of $1m ... but hey, if you sell a comparable house in Auckland, than it still will pay ways more than that - won't it? No point in comparing the average run of the mill Auckland house price with the price for the top level OCA units.

If you want an intelligent discussion, than please compare pineapples with pineapples. Anything else is just downramping.

[Fiordland Moose]

The market sent a big message out in the days following Arvida's pretty good full year result .... pushing the ARV share price down 12% over a few days

The message was plain and simple - the retirement sector is stuffed - its had it years of good times and now its going to have years of not so good times

Always pays to listen to market messages - especially emphatic ones  Winner OCA thread

Its amazing over so many years how the retirement village segment has tracked the housing sector.  Not completely logical because often people make needs or lifestyle based decisions regardless of where housing is at but the correlation between the two sectors is stunning and undeniable.
I reckon all retirement sector investors have to "look forward to" in the foreseeable future is reading an almost endless series of reports in the media about how the real estate market is in steep decline and watching their shares do much the same.

Some people should check their facts.  Average price of an independent living unit in upmarket villages can be very close to the surrounding real estate price.
Care suites that OCA have and make almost no money on are a different story but they're not selling well at all so who really cares.
Check out the prices of a sea view independent unit at the Sands in Browns Bay or the Ryman Devonport Auckland units with an asking price of $1.9m.
Press article I read today said sales of $2m+ houses in Devonport had all but dried up.  Hmmm
RYM said in their recent annual report the average price of their independent living units in the Auckland region is $1.4m but the average house price in Auckland is now $1.1m.     RYM's contention is because their villages are generally in upmarket suburbs there is still  good headroom but is that still the case ?

Not disputing the sun will still rise tomorrow but it could be covered by black clouds just like this sector.

I love it when people are trying to rise the fear level in the market by comparing pineapples with apples. Tells you so much about human nature.

Sure - OCA sells some large units with sea view north of $1m ... but hey, if you sell a comparable house in Auckland, than it still will pay ways more than that - won't it? No point in comparing the average run of the mill Auckland house price with the price for the top level OCA units.

If you want an intelligent discussion, than please compare pineapples with pineapples. Anything else is just downramping.

Re your last line BP, sadly, ramping (whether ramping it up or ramping it down) is just what some posters in these forums specialise in.

[Basil]

https://www.oneroof.co.nz/news/41755 $2m+ Devonport market dries up.
RYM 2 bedroom unit in Devonport $1.9m  https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3512199774
How are people going to buy the $1.9m RYM unit in Devonport if they can't sell their $2m+ Devonport home ?

Might we see the same thing play out with OCA's premier Waimarie development as St Heliers residents struggle to sell their $2m+ houses to afford a high priced Waimarie independent living unit ?

That said across Auckland at least, RYM appear most exposed to the huge falls and slowdown at the top end of the market because their units are generally priced on an equivalent basis.

[Fiordland Moose]

https://www.oneroof.co.nz/news/41755 $2m+ Devonport market dries up.
RYM 2 bedroom unit in Devonport $1.9m  https://www.trademe.co.nz/a/property/retirement-villages/auckland/north-shore-city/devonport/listing/3512199774
How are people going to buy the $1.9m RYM unit in Devonport if they can't sell their $2m+ Devonport home ?

Might we see the same thing play out with OCA's premier Waimarie development as St Heliers residents struggle to sell their $2m+ houses to afford a high priced Waimarie independent living unit ?

That said across Auckland at least, RYM appear most exposed to the huge falls and slowdown at the top end of the market because their units are generally priced on an equivalent basis.

[Shareguy]

Bula . I sit here on a tropical beach in Fiji reading the posts. The resorts are full and people are happy.

When I reflect on the retirement sector with my "rose tinted glasses" I see increased demand from an aging population and a government who has largely left it to the private sector to provide. Sure they need to come to the party with care costs, and they will 😎.  If they don't operators will reduce services or continue to fund it through other areas.


One thing I have learnt is that economist's and property experts are often wrong. As a general rule property historically has doubled every ten years. Will that continue...who knows.  I personally think it will.

When you look at building costs increasing at such a fast rate and high inflation it is hard to see house prices falling hard and for long.

So with that in mind I see retirement units increasing over time as they have done. What ever happens won't make much difference as far as selling the family home and buying a retirement unit on the same market. It's only one part of the equation, but a large one.

I'm bullish on the retirement sector and own shares in all four of the larger ones. I have been using the current price weakness to increase holdings.  I can't pick the bottom so buy in parcels till I have enough. I'm a long term holder and and have learnt that property is a good proposition if you are in for the long term. Get rich slowly.

Well it's time to take my rose tinted glasses off and have some breakfast.

[Basil]

Housing is already severely unaffordable and most loan applicants are being stress tested by the banks @ 7-8% and failing.  Lack of buyers due to severe unaffordability is the reason sales volumes are drying up.

Housing has now reached a point where a major reset is required and is starting to happen.  The bubble of 2021 (up 25%) was fueled off the back of once in a 100 year low interest rates and the bubble is just starting to pop. https://www.interest.co.nz/property/116632/corelogic-says-property-values-falling-around-country-waiheke-island-had-biggest  Its just starting....a long way to go...

Huge stock level's and sales volumes drying up are your best clue as to where this is going in the short term, (supply and demand disequilibrium surely leads to further substantial falls) .  Longer term where the housing market goes, who knows but the chances of an extended period wherein housing struggles to even keep up with inflation, (continues to gradually fall after the initial reset) look good to me.

Dollar cost averaging into the best of breed in this sector is a great strategy but I think its too early to start.  Leave it 6-9 months and then DCA over the next 12-24 months and stick to companies with the best and most proven business models.

No evidence exists that the Govt will relent on underfunding of care but plenty of evidence from all listed companies the problem is getting worse.  I think Labour are happy to "tax" the retirement sector in this way.  Maybe National will take a different approach and fix this if they get into power, maybe not. Stick to companies with just a modest level of care in their business model looks like the safest strategy.

All companies in this sector are in a confirmed downtrend and buying in such usually results in short term pain.

[kiwi2007]

Chriss Lee putting the boot in too:
TWO groups that will not appreciate rising interest rates are the listed property trusts (indeed all landlords) and the retirement villages.

Rising interest rates drive down capitalisation rates. Lower cap rates lead to lower valuations. Property trusts and retirement villages have to report changes in the annual valuation of their properties.

When interest rates fall, cap rates rise, so valuations rise. The property trusts and retirement villages report the ''profits'' that arise from higher valuations.

Here's how it works.

Property Trust A has a property producing $5 million of rent. If interest rates are 3%, the valuer each year may value the building at, say, 20 times the rent, a ''cap rate'' of 5%, two per cent more than bank rates. The valuer multiplies the $5k rent by 20 and ''values'' the building at $100 million.

If interest rates fell the next year to 2%, the ''cap rate'' might go to 25, effectively calculating that a buyer might buy the building at a yield of 4%. The valuer would argue that the building is worth 25 times the rent - $125m.

Triumphantly, Property Trust A claims a revaluation profit of $25m.

But if rates rise from 3% to 4%, the ''cap rate'' must fall as the mythical buyer would want a 6% yield from the rent. The new cap rate would not be 25, not 20, but 16.67% (16.67 x 6 = 100).

The new valuation would thus be 16.67 x 5m (rent), or $83.55m, a fall of $16.65m. Property Trust A then announces the effect of falling cap rates has decimated its profits.

In recent years, all property trusts and retirement villages have scored huge revaluation gains based on rising cap rates.

We may now be in an era, for some years that highlight the wisdom of knowing when to sell.

If we do reach that point in 2022 and 2023, we may see a replay of the 1980s. That was when all sorts of charlatans claimed to be property gurus and engaged in a race to buy more buildings than their competitors by borrowing gaily from badly-managed banks.

When interest rates were in double figures, and when one could buy government stock at yields of 17%, various dopes were buying properties at yields of as low as 6%, exploiting particularly the BNZ's braindead willingness to achieve growth by lending to property ''gurus''.

I recall a building on Thorndon Quay, bought for $5m, with bank debt of $4m, selling two years later for $1.5m, the new buyer funded by the same bank which was writing off $2.5m of its original loan.

The Westpac building on Lambton Quay sold for $35m, and a few years later sold for little more than half that.

Tough times and rising rates, leading to lower cap rates, will sort out the skilled property people from the wide boys. There may be some areas where demand exceeds supply – like Wellington – but there will be other areas like lower Queen Street, where demand is low.

My guess is that, right now, the banks are pressuring the weaker of their big-time commercial property clients into cancelling dividends and reducing debts.

Some will see this, to use the cliché, as banks removing the umbrellas as rain clouds appear.

I would see such a response as a sane corrective action to previously foolish banking practices – over-lending to over-confident people when markets were over-priced.

Those who have cash, and modest debt, might be mopping up some bargains.

Retail investors, in my opinion, should be attentive, ensuring their portfolios will continue to match their risk tolerance.

https://www.chrislee.co.nz/taking-stock

[winner (n)]

This weeks update

Really good week on NZX with NZX50 up 3.9% but retirement sector continues to under perform

Average gain 0.6% (if we leave out RAD average was 2.4% - no doubt SUM boosted that number)

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[winner (n)]

Property prices June

HPI DOWN 1.9% from May

HPI declined 5.4% over last three months.... and now only 0.7% higher than a year ago.

Retirement sector share prices tend to track property prices

[BlackPeter]

Property prices June

HPI DOWN 1.9% from May

HPI declined 5.4% over last three months.... and now only 0.7% higher than a year ago.

Retirement sector share prices tend to track property prices

Hmm - something like that.

Retirement sector down roughly 40% from 2021 peak.

Property prices so far down roughly 10% from 2021 peak.

Retirement sector started to drop some months earlier than property sector.

Who is tracking whom?

I guess either retirement sector is an oracle for the real estate (and in this case ... better buckle up) ... or (in my view more likely) is currently impacted by severe hype deflation.

Tide will come in back. It always does ...

[winner (n)]

BP - UBS says HPI explains 34% of retirement of share price performance .... but you already knew that it wasn't a one to one relationship

Over time the relationship shown inYou cannot view this attachment.  chart below

If too much 'noise' for ypur liking just ignore it

You cannot view this attachment.