Sharechat Logo

Summerset feels pinch of slowing housing, construction market

Tuesday 30th April 2019

Text too small?

Summerset Group has scaled back its development programme temporarily due to the slowdown in the housing market, particularly in Auckland and Christchurch.

The retirement village operator was quizzed about its development pace by shareholders at its annual meeting in Wellington. One shareholder highlighted that Summerset built 454 units in calendar 2018, slightly more than in the previous year, but sold only 339 new occupation rights, down from 382 the previous year.

Chair Rob Campbell noted Summerset also resold 301 occupation rights to existing units but acknowledged the market has slowed further this year, negatively impacting the first quarter result.

It sold 137 occupation rights, including 71 new ones, in the March quarter, down from 143 in the March quarter of 2018 when 68 were new.

“Fundamentally, demand remains robust for our product and will continue to grow over time,” Campbell told the meeting.

“Although we expect these conditions to continue through this year, we do not expect any material increase in unsold stock numbers.”

Summerset shares rose 0.2 percent to $5.67, trimming their decline this year to about 7 percent.

The company had 281 completed but not contracted new units at Dec. 31.

Previously, Summerset has said it wanted to increase its build rate to 600 units a year. Chief executive Julian Cook said the company will probably build only about 350 this year as the company tailors its building programme to meet demand.

Nevertheless, he expects the average over the next two years will be about 500 a year.

One shareholder was particularly concerned about the level of unsold units at a new village, Rototuna on the outskirts of Hamilton, particularly since a nearby Ryman Healthcare village had sold out. That shareholder suggested the company was trying to gloss over a problem area and was “being misleading.”

Campbell denied this: “There’s absolutely no intention to mislead anyone about any of our villages. Rototuna is no different from any of the villages,” he said.

“Experience has shown us that we get a much quicker take-up once we have the main building opened. We still think that will be a very successful village. I’ve got no concerns about that.” The board receives weekly reports on sales and resales and “we review village by village in a lot of detail.”

The first residents moved into Rototuna in July last year.

Cook said the company is still seeing “reasonable” levels of interest for units at its Ellerslie and Hobsonville villages.

Summerset is also seeing capacity constraints on construction in many parts of the country, particularly in Auckland.

“We do not expect the pressure in the construction market to reduce this year. There were a number of construction-related company failures in 2018 and while we have very limited exposure to any of these, we believe 2019 may bring more and Summerset will continue to be vigilant in this area.”

Campbell explained that Summerset has its own in-house design and development team and that it mainly experiences such pressures at the sub-contractor level.

(BusinessDesk)



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar bounces off four-year low; seen weaker
Vector urges regulatory change in low-interest-rate environment
Vector urges regulatory change in low-interest-rate environment
Govt moves against surprise Supreme Court 'black hole' tax ruling
Qantas CFO Race Strauss to join A2 Milk as CFO
Climate Committee seeks data, evidence for future carbon budgets
Spark's wobbly world cup start raises stakes for live-streaming - analysts
An algorithm dunnit: anatomy of Spark's mid-match surrender
Stanley-Tallwood liquidator cuts deal over KiwiBuild development
Stanley-Tallwood liquidator cuts deal over KiwiBuild development

IRG See IRG research reports