Property Stocks

[Waltzing]

Great day for many stock  across a number of sectors including property, retirement, retail even and banks...

was this the bottom? the RBNZ giving hope to the market that it wasnt blind deaf and dumb....

[Waltzing]

well house prices maybe in the ditch but COMP PROP's like ARG appear to have bounced out of the ditch....

cant imagine why but is yield attracting a bid and was that  the  LOW... hope not ...

[Waltzing]

order building in ARG ...

yield coming down in Fix income ...

https://www.interest.co.nz/personal-finance/128780/anz-goes-second-cutting-retail-rates-both-fixed-home-loan-and-term-deposit

[Waltzing]

notice how fast this stock has been repriced ... a year or 2 ahead of its performance ....

the mere hint of rate cuts and Sir B buying and that was it .. to late to pick up a few 100 g or more at the 101 price that many are waiting for the orders to filled at...

[Basil]

I thought about buying a few more ARG today but it got away from me, so I hounded up a few KPG instead, not many.  Need to keep plenty of cash up my sleeve to pound the crap out of HGH if their annual report is okay next month.

[Waltzing]

THE PROPS - BOB, BOUNCING OFF THE BOTTOM

[Waltzing]

wondered why those comp props are well bid at the moment and this might be why

https://www.interest.co.nz/economy/129057/david-hargreaves-previews-forthcoming-ocr-review-which-all-attention-revolves-around

[Dolcile]

I've got a slice of cash sitting on a cash fund at the moment, I'm thinking about moving it to the Kernel NZ Commercial Property Fund - get some exposure to the sector.

[Waltzing]

surely ARG has run well fast the OCR pivot at 1.18 but this also show the effect of a OCR expected path over the next 12 to 24 months...

the market moves very quickly with yield stocks showing the way forward.

that buy the day before was the thing to do.... that thing you do...

[Basil]

Property stocks benefit in quite a number of ways from lower interest rates and quite obviously we're now only just past the point of inflection where the cycle has turned.

Benefits include but are not limited too:-
1. Lower funding costs going forward, (ARG have just over a two year weighted average term to run on their loans so will benefit nicely when those are refixed
2. The economy improving enabling a stronger leasing market and better outcomes on rent review negotiations leading to more income
3. Lower future capitalization rates of lease income such that NTA increases when assessed by the valuers
4. Better outcomes for new builds and new tenant enquiry

Additionally, Investors value their tax free PIE income distributions more highly as by comparison to what they can get elsewhere in the market, the dividends look highly attractive.

I expect ARG to rerate gradually to circa $1.60 over the next few years.  The initial bounce from $1.02 where I initially took a large stake, is just a bounce off a very heavily oversold position, i.e. low hanging fruit.

It's clear the economy is very weak so I expect a lot more cuts to come from the RBNZ, sooner rather than later.  Even at $1.18 for ARG, 6.65 cps annual dividends gives 5.64% tax free income = 8.42% gross for 33% taxpayers.  That plus capital gains are highly attractive as we swiftly head into a lower interest environment.  ARG also have a track record of on average, slowly growing dividends over time, unlike KPG who have a truly shocking track record of shrinking them over time.

[Cod]

OCR to be at 4.5% in July 2025 according to the RBNZ MPS August, which means each OCR Review + MPS till then will be a 0.25% drop, I think the next one is November.
I see the desire to not crash the economy completly is at the moment equally balanced by the desire to lower inflation (balanced competing interests).
Each OCR drop is probably going to be followed by a rerate of all comp props (excepting) GMT of about 8-10 cents. GMT's rerate will be slower and smaller because of it's lower dividend return IMHO.

[Waltzing]

yup yield stocks .. pump it up ....

https://www.youtube.com/watch?v=3Y71iDvCYXA

[Stoploss]

OCR to be at 4.5% in July 2025 according to the RBNZ MPS August, which means each OCR Review + MPS till then will be a 0.25% drop, I think the next one is November.
I see the desire to not crash the economy completly is at the moment equally balanced by the desire to lower inflation (balanced competing interests).
Each OCR drop is probably going to be followed by a rerate of all comp props (excepting) GMT of about 8-10 cents. GMT's rerate will be slower and smaller because of it's lower dividend return IMHO.

Review dates
9 Oct
27 Nov
 I'm picking 75 points between the two .

[Waltzing]

with china looking like it cannot control it property sector and US comp props under pressure....

you might have to be selective in this sector...


stagflation is hanging like the swords of "Sword of Damocles."


RBNZ has a little page on this sector world wide... but really is that all they have to say on the matter? must be another page and data...

[KW]

From the AFR.  No doubt this applies to NZ as well. Avoid property in the Auckland CBD near all the social housing places, and stick to ones close to Britomart and Commercial Bay.  North Shore might be dying too.  Wellington is probably a lost cause, but Govt tenants cant afford to move to nicer offices now .  Christchurch doesnt have any offices lol.  Owners of large shopping malls will do well, strip/local malls not so well.  Specialist property plays (storage, health, childcare etc) will be dependent on the underlying operating sector economics.  

I have a lot of money in AREITs at present - I'm up 16% in 2024 with a bunch of dividends yet to come.  All bar one (my single pure play office REIT) are in nice uptrends as they await interest rate reductions in Australia.  Its been super easy money (which is why I like them so much) 
................................................................
And the office market? Don't believe the horror stories out of the United States. Australia's office market is going to split between the haves and the have-nots, but Harrison says that after a 22 per cent fall in valuations in two years, we've hit the bottom for the high-quality assets he wants to buy.
"I don't think it's as bad as everyone thinks," he says. "There'll be winners and losers, and for good quality assets, yes, we have hit trough pricing."
Sought-after assets
Not only that, but premium office towers in the core of cities such as Sydney are also becoming sought after by big institutional investors.
Brookfield's co-head of Australian real estate at Brookfield Asset Management, Ruban Kaneshamoorthy, is bullish on premium office property and would like to get more, but the lack of new supply over the next five to 10 years is going to make it harder to find these jewels.
"There's no new supply coming on," he says. "Economic rents that you need to justify developments are at minimum 30 per cent to 40 per cent higher, and probably even higher."
Harrison and the chief executive of Dexus, Ross Du Vernet, say the office market will be split between premium assets in the core of Australia's CBDs, and lower-quality buildings that are either in the wrong locations, or will cost too much money to update to the standard tenants now demand.
"Capital follows tenants," Harrison says. "Tenant demand is definitely focusing on modern, well-located assets. I think older assets are going to become more and more difficult to both keep tenants and attract tenants."
De Vernet says that if given the choice between a premium asset in the wrong part of town, and an older building in the core of the CBD with strong transport connections, he's picking the latter.
The question of what happens to the second-tier B-grade and C-grade office buildings that dot the country's cities is a difficult one to answer.
Kaneshamoorthy is blunt: the owners of these properties are in trouble.
"Honestly, I wouldn't want to be a holder of a second-grade building, because that stuff is just going to fall off a cliff. The reason being, you can't lease it. You can't find a tenant. Banks, therefore, don't want to lend to you. So it's a sort of self-fulfilling spiral to the bottom."
Harrison and Du Vernet see two other factors as being in their favour.
One is yet another shift in the work-from-home trend, with the NSW government telling public servants to get back to the office. "All this work-from-home nonsense is completely changing," Harrison says.
On Monday, Lendlease CEO Tony Lombardo said he was not seeing tenants change their space requirements. "If you're coming in three days a week, you still need to have the same office space," Lombardo said. "If anything, what we are finding on the three days, there's not enough desks for the amount of people that come in on the three days, and that's becoming a real capacity issue."
Harrison has noticed a shift away from hot-desking (or activity-based working, as it's known) and towards fixed desks – including at Charter Hall. "We certainly have, and we're not going back," he says. "I think workspace ratios have risen."
The other tailwind is looming rate cuts, which Du Vernet says will bring buyers back to Australian property markets.
"I think probably all owners are feeling that transaction volumes are very low," he says. "But I do think that the psychological impact of a cut will actually be quite important for the market."
Those low transaction levels might soon change, too. Ian Holmes, principal at advisory firm Denison Partners, says office assets worth $40 billion are sitting in five wholesale funds that will be subject to liquidity reviews in the next three years.
Some of those assets may need to be sold to fund liquidity pressure, and the valuation of all assets will be closely scrutinised. Homes says that will be an interesting process, given "it's not obvious that there's a long list of buyers".
Except, of course, for those premium buildings, where it seems everyone still wants to be.