SUM Summerset Group

[Shareguy]

So 1H24 sales volumes up 22 % on pcp. A great result and looks like they are gaining market share, but from who?

uNPAT flat due to higher costs and lower margin.

2H waiting to new sales with 55 percent of new unit completions to occur. St John's has pre sold 40 units with move in date early October.

The announcement states "Our residents' motivation to buy continues to be driven by life events, such as their health or desire for more community, these factors don't change in a constrained economy" House prices are just part of the equation.

All the modelling that I have seen suggests demand is going to increase without question.
I reckon all the operators will be looking at increasing prices. Interest rate cuts are not far away. Then there is Nationals announcement today on increasing land supply, what affect if any will this have.

On the whole a good update. With share prices so beaten down in the sector one would think that M&A is a real possibility.

[Basil]

No doubt about it that SUM continue to impress and execute like a very well-oiled Swiss watch.  An absolute master class in this sector which is otherwise dogged with all others tripping themselves up in so many ways.

I would buy except for one thing.  I think the downwards momentum in the real estate market is really picking up pace and is now essentially a crash.  https://www.interest.co.nz/property/128530/average-asking-price-homes-listed-sale-realestateconz-down-90071-february-auckland

I think we are only approx. halfway through a really major house price correction in N.Z. and when the dust has settled this will have major ramifications for the margins on new builds and resale in the years ahead.  When the tide is going out at a really fierce pace, its best to simply not go swimming.

[Buzz]

No doubt about it that SUM continue to impress and execute like a very well-oiled Swiss watch.  An absolute master class in this sector which is otherwise dogged with all others tripping themselves up in so many ways.

I would buy except for one thing.  I think the downwards momentum in the real estate market is really picking up pace and is now essentially a crash.  https://www.interest.co.nz/property/128530/average-asking-price-homes-listed-sale-realestateconz-down-90071-february-auckland

I think we are only approx. halfway through a really major house price correction in N.Z. and when the dust has settled this will have major ramifications for the margins on new builds and resale in the years ahead.  When the tide is going out at a really fierce pace, its best to simply not go swimming.

You may be right who knows, but you keep conflating the general housing market to the RV market, and SUM keeps showing you that this is not the case. None of the RV's are significantly lowering the ORA sell prices, and none of them are suffering serious declines in sales volumes.

I think the correlation of the general housing market property prices and sales volumes, to a needs based RV property price and sales volumes is fraught. They do not seem to closely correlate, maybe some echo but not close correlation.

People get old, the ones that are prospective listed RV's residents have money, they sell regardless of the market eventually, they buy an ORA, they move in and enjoy a lovely lifestyle for the rest of their life.

RV's are not, imo, illustrative of the general housing market and visa versa. SUM today told us again, as they have in the past, that this is the case. Conflating general housing property market circumstances to needs bases RV's is fraught.

[BlackPeter]

I think we are only approx. halfway through a really major house price correction in N.Z. and when the dust has settled this will have major ramifications for the margins on new builds and resale in the years ahead.  When the tide is going out at a really fierce pace, its best to simply not go swimming.

Oh dear - try some happy pills, it helped my father in his last years.

Obviously everybody is entitled to their opinion, but trying to correlate them with some facts could make them more credible.

Here are some facts:

House prices in all parts of NZ settled around early this year at between 10% and 20 % lower than their respective peaks in second half of 2021. Look at any house price graph, and it looks like rock bottom with in most areas a slight recovery over the last handful of months visible. Actually, quite unusual given we moved into winter.

Economy moved nicely into the by RBNZ designed recession and no doubt RBNZ will soon need to do something to prevent the slow down turning into a crash. So - what is a bus driver doing when he notices there is a chasm in front of him in the road? Stay on the pedal, or slow down? Exactly, i.e. interest rates will go down (and likely earlier than later) and markets will relax.

Look, Einstein told us that only the universe and human stupidity are infinite ... but so far I don't see why our RB's would want to crash their respective economies. If things are really as bad as you say (I think you carry as well some selective goggles), then no doubt the RB's of the world will drop interest rates soon. Actually - Europe started already. Did you miss this memo? US next? How long after that do you think a RBNZ bus driver can survive keeping his pace without being replaced by politicians who want to be re-elected?

No doubt one day we will have this terrible crash some Internet gurus are predicting every other year for the last 30 years or so ... but honestly - I don't see the odds for this time being now.

[Basil]

Maybe you missed the link to the article I provided earlier that said the average house price is already down 30% in real inflation adjusted terms, (I presume you know what real inflation adjusted terms means?), from the late 2021 peak or maybe the other link to an article that said average asking prices for houses in N.Z. are down another $90,000 just since February 2024.  The pace of the decline seems to be accelerating but if it makes you more content to think otherwise...that's fine mate.  I prefer to be a realist than either a pessimist or an optimist but whatever works for you....go for it.

My happy place is walking my dog with or without friends or on my boat with or without friends and family.  I don't need anti-depressants but "thanks" so much for the medical advice, that was so kind of you.

[Breezy]

Maybe you missed the link to the article I provided earlier that said the average house price is already down 30% in real inflation adjusted terms, (I presume you know what real inflation adjusted terms means?), from the late 2021 peak or maybe the other link to an article that said average asking prices for houses in N.Z. are down another $90,000 just since February 2024.  The pace of the decline seems to be accelerating but if it makes you more content to think otherwise...that's fine mate.  I prefer to be a realist than either a pessimist or an optimist but whatever works for you....go for it.

My happy place is walking my dog with or without friends or on my boat with or without friends and family.  I don't need anti-depressants but "thanks" so much for the medical advice, that was so kind of you.

Pessimistic means taking an unfavorable view of events or conditions and expecting an unfavorable outcome. In terms of the RV sector this definitely describes your stance so just embrace it, no point dressing it down by saying you are a realist.

[Waltzing]

https://www.interest.co.nz/property/128530/average-asking-price-homes-listed-sale-realestateconz-down-90071-february-auckland

down at the moment ...

does that mean people are moving where or just dumping those xtra homes now that bright lines (bright lines?)... who makes up this junk...

1st july change ... its dump season and that is why the prices are probably down as people rush to exit the brick and wood huts, apartments and sheds...

[Basil]

The amount of housing stock for sale is at a 10 year high and average asking prices are tumbling, according to the latest data from property sales and rental website Realestate.co.nz.   The website had 31,745 residential properties available for sale at the end of June. That's up 28.6% compared to June last year, and the highest level of stock for sale on the website for the month of June since 2014.

Hey Waltzing.  That record level of stock for sale and record rate of asking price declines is before the change in bright line test was reduced from 10 to 2 years on 1 July 2024.  Some commentators are saying they expect a lot of new listings as a result of that big tax change.  For example, if you bought 6-7 years ago, you're still ahead compared to current prices, but can you sell...that's the big question.

One thing we know from history is that when there's record levels of houses for sale, that's normally a lead indicator for further price reductions.   Others will have a different view and think this is the bottom for housing but I note we're still 16% above average level's of affordability according to a recent article I posted a link to.  Another 16% decline in nominal terms is likely at least 20% in real inflation adjusted terms and adding that to the 30% we've already experienced, it seems quite plausible to me that in real terms, housing could easily halve between late 2021 and some point in the short to medium term future.    Some will still think that will have no impact on the RV sector.  Good luck with that.  History tells us that the fortunes of the RV and housing market are inextricably linked.

[KW]

Hey Waltzing.  That record level of stock for sale and record rate of asking price declines is before the change in bright line test was reduced from 10 to 2 years on 1 July 2024.  Some commentators are saying they expect a lot of new listings as a result of that big tax change.  For example, if you bought 6-7 years ago, you're still ahead compared to current prices, but can you sell...that's the big question.

Those that are looking to sell are the ones under the old 5 year Brightline period, so anyone who bought between 2019 and 2022.  The ones that bought closer to 2019 may still have some profits left to preserve.  Those that bought in 2022 probably have none, and would have been better off selling within the Brightline period so as to preserve the tax losses they can carry forward.  Currently real estate agencies are advertising for landlords to sell due to the Brightline change.  Allowing for the 90 day tenancy termination notice period, rental properties should start hitting the market July-Oct.  

Also note that realestate.co.nz has a much smaller number of listings than TradeMe.  TradeMe currently has 42,785 homes for sale.  And that's not counting the advertisements for blocks of townhouses that cover multiple properties rather than just one.

[Waltzing]

Slight;y off topic but the threat of a house price collapse could panic the public to sell and also panic the RBNZ..

The reserve bank will no doubt realise that underwater home owners both in monetary and real world climate ways are not what it wants.. expect the RBNZ to keep house prices within a range that does not cause banking problems and scares the economy ...

recently observed the behaviours of KIWIS (human version) and what they will do to secure properties and the basic instincts that kick in...

 This madness in which there is no expert financial modelling deployed by the private investor public (plumbers in this case) showed a complete lack of logic and therefore it is likely the threat to the banking system is a real and present danger...
 

[BlackPeter]

Hey Waltzing.  That record level of stock for sale and record rate of asking price declines is before the change in bright line test was reduced from 10 to 2 years on 1 July 2024.  Some commentators are saying they expect a lot of new listings as a result of that big tax change.  For example, if you bought 6-7 years ago, you're still ahead compared to current prices, but can you sell...that's the big question.

One thing we know from history is that when there's record levels of houses for sale, that's normally a lead indicator for further price reductions.   Others will have a different view and think this is the bottom for housing but I note we're still 16% above average level's of affordability according to a recent article I posted a link to.  Another 16% decline in nominal terms is likely at least 20% in real inflation adjusted terms and adding that to the 30% we've already experienced, it seems quite plausible to me that in real terms, housing could easily halve between late 2021 and some point in the short to medium term future.    Some will still think that will have no impact on the RV sector.  Good luck with that.  History tells us that the fortunes of the RV and housing market are inextricably linked.

[/irony on]

You are so right. Things are terrible and will get worse and worse over time. No need to assume that the market movement so far is already half way to the bottom, given that any intelligent being extrapolates trends in a linear fashion. Remember - the past is the best indicator of the future!

Obviously - intelligent forecasters put the start of the past where it suits them, otherwise this whole business would not work - i.e. please start at the last peak, and not - say - a couple of decades ago.

So - given that you remembered us that prices dropped in real terms 30% in the last two years, it clearly means that prices will keep dropping by 15% per year in real terms. The past after all is the best indicator for the future as an unnamed poster used to say - and linear extrapolation is king!

Lets do the numbers: Your property was 130% 2 years ago, it is now worth 100%, next year it will be 85%, in 2 years 70% ... and after only 6 years its price will be 10% of what it is now. Worse - one year later you will need to pay any buyer to take your property off you.

Shudder - the end of the world is nigh, lets hope this asteroid hits us before, shall we?

There is just this thing with the past ... the end of the world has been predicted hundreds of times before ... and guess what - the world didn't care.

Maybe one thing we really can learn from the past: More doomsday prophets around than you can place angels dancing on the point of a needle ... and none of them so far was right (the prophets, I obviously wouldn't doubt the angels )

Maybe just a case of much more doom-sayers than dooms.

Anyway - waiting to takeover in 10 years all of NZ property - and get 50% of the current value paid just to take it (remember - 15% pa - i.e. property will be at negative 50%) - but then, if I wait another decade longer I would get 200%! I love the power of linear extrapolation;

PS: I know, I forgot the power of compounding interest, but this was just to be nice to the faint hearted. Trust the doomers - The real devaluation of our property and shares will be much worse. Be afraid, be very afraid ... the end is nigh!

Ah - I forgot - we live in a housing crisis, don't we? What happens if supply is lower than demand - right - prices always move at the will of the doomer ...?

Interesting times

[/irony off]

[Basil]

Good idea to "do an ostrich" and keep your head down BP, everything will work out okay if you just ignore what's going on and how the speed of the housing falls is picking up and that's before the National Govt wants to flood cities with housing supply.  RYM down 75% from the peak, OCA down 65%, ARV down 55%...it cannot possibly get any worse.  Great strategy, what could possibly go wrong 

[Greekwatchdog]

Not a good look Paywalled out of the Herald

Short

A delay in the construction of care facilities at Whangārei's new Summerset Mt Denby retirement village has upset some residents who say they wouldn't have bought into the complex had they known there'd be such a long wait.
One resident, who didn't want to be named, said four people had died while being forced to live separately from their spouses due to the lack of onsite care facilities at Mt Denby. Couples had been distraught at the separation from each other.

[allfromacell]

Neglecting care facilities is good for short term profitably but will come back to bite as shortages worsen against rising demand.   

[BlackPeter]

Neglecting care facilities is good for short term profitably but will come back to bite as shortages worsen against rising demand.   

Good point. It is short sighted traders who determine the share price. That's why investors always win in the long run.