The most recent stats on CPI (Consumer Price Inflation) are pretty flat, which to me suggests that we are looking at another drop in the OCR (Official Cash Rate). This means cheaper mortgages, which means more demand for property. The increased demand will push prices up, causing property investors to be in a better position to buy more property with equity in their existing property portfolio. This will create more demand, and push prices higher.
This will help companies that benefit from high property prices, which includes retirement villages as older folks feel that a buoyant housing market is a good time to sell – giving them more money to move into a retirement home. Of course the flip side of that, is that retirement home prices go up as the value of property goes up, so I believe they stand to benefit from increased demand (sales) and price.
I think Summerset (NZX:SUM) is a great buy right now because they have a massive land bank, build a lot of property each year, and their properties are good quality. The main concern investors seems to have is the growing number of unsold units each year, though Q3 sales stats may abate a lot of this concern, making Summerset my clear preference.
I think Ryman Healthcare (NZX:RYM) could be a better buy in some ways, because with the risk of rising prices and the economic (and general) volatility at the moment, older people may be attracted to Ryman’s fixed fee’s for life offering. Though I’m a little put off Ryman since reports of problems with the built quality of their buildings, which could bring costs and problems for the company later down the line. Additionally, they have a greater presence outside NZ, which carries its own risk to their clientele.