Retirement village operator Summerset has lifted its sales through the first half of the year even as it trims its building plans, in a sign that demand from older New Zealanders is holding firm while the wider housing market stays flat.
The company told the sharemarket on Tuesday that it settled 448 occupation right sales in the three months to the end of June, made up of 221 new units and 227 resales. Resales, which are the units that come back onto the market when a previous resident leaves or dies, rose 26 percent on the same quarter a year earlier. Across the first six months of the year, total sales were up 17 percent, which Summerset said was driven by strong demand for its new village centre buildings and continued momentum at its St Johns village in east Auckland.
The figures matter because occupation right sales are the engine of a retirement village business. Residents buy the right to live in a unit rather than owning it outright, and when they leave, the operator keeps a slice of the resale value and puts the unit back on the market. Steady resale volumes suggest the company is turning over its existing stock at a healthy clip, while new sales show it can still fill the villages it is building.
The result stands out against a residential property market that has spent much of the year going sideways. House prices have barely moved, sales volumes have been thin, and buyers have been waiting for the Reserve Bank to show its hand on interest rates. Retirement villages are not immune to that mood, because many older buyers need to sell the family home before they can move in. That Summerset kept its sales rising through a soft market points to the strength of the underlying demand as the population ages.
Not everything in the update was pointing up. Summerset said it had cut its New Zealand building program by 50 homes in response to what it called changing economic conditions, a quiet acknowledgement that it is not immune to higher construction costs and a cautious market. Even so, the company said it remains on track to hand over between 700 and 800 homes across New Zealand and Australia this financial year, which would still rank among its bigger delivery years.
The pullback in building is worth watching. Retirement operators across the country have been scaling back after a long stretch of aggressive expansion, as the cost of land, materials and labour climbed and the resale market slowed. Summerset trimming 50 homes is modest, but it fits a pattern of the sector building more carefully rather than at full tilt.
Summerset is one of the largest listed companies on the New Zealand sharemarket and one of a handful of big retirement operators, alongside Ryman Healthcare and Oceania Healthcare, that have grown up around the country’s ageing population. Roughly one in six New Zealanders is now aged 65 or over, and that share is set to keep climbing for decades, which underpins the long-run case for the whole sector. The near-term question has always been whether a weak housing market would choke off sales in the meantime, and this update suggests that so far it has not.
The company has also pushed across the Tasman, opening villages in Victoria as it looks for growth beyond a New Zealand market where it already has a large presence. Its second Melbourne village is due to open, part of a wider bet that the same demographic pressures playing out at home will support demand in Australia’s larger population.
Investors took the quarterly numbers in their stride. The NZX 50 index was little changed on Tuesday, holding onto recent gains as the market waited for the Reserve Bank’s official cash rate decision on Wednesday. Sentiment across the market has improved in recent weeks as petrol prices have eased and inflation worries have cooled, though economists remain split on exactly when the Reserve Bank will start lifting rates.
Summerset said it would release its full half-year results on 27 August, when the market will get a clearer picture of how the higher sales volumes are flowing through to profit and cash. Sales updates like this one give a read on demand, but they do not show the margins the company is earning, which is where the effect of higher building costs and a slower resale market will show up.
For now, the message from one of the country’s biggest builders of homes for older New Zealanders is that people are still buying, even if the company itself is building a little more cautiously than it once planned. More detail on the quarter is available through Summerset’s investor centre.
What do you make of the state of the retirement village sector and the wider housing market? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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