We pulled 7 gems from the torrent of property news this week to keep you abreast of the most important insights affecting property investors 13-19 June 2020
In property news this week we have 7 great pieces…
- Centuria back for another crack at Augusta
- Property value drop drags Asset Plus into the red
- Provincia inspires confidence, says investor
- Retail interest rates on the RBNZ watchlist
- NZ’s economic recovery will not be population-led
- Westpac says house price decline will be worse than the recessions of the 1990s
- Valuers say bullshit and give an opposing view on house prices
Centuria back for another crack at Augusta
Australian funds manager Centuria Capital Group resumed its bid to buy the whole of NZX-listed funds manager Augusta Capital Ltd on Monday, but at “an implied” $1 per share for the balance.
Centuria withdrew a $2 per share takeover bid at the end of March, then participated in Augusta’s subsequent capital-raising at 55c per share. That took Centuria to a 22.875% holding.
On Monday, Centuria announced it had entered lockup agreements lifting its stake to 42.175%, offering participants $0.20 cash plus $0.392 of a Centuria stapled security – equating, at the moment, to the implied $1 per share.
The two biggest shareholders with lockup agreements are Augusta managing director Mark Francis (21.2 million shares) and director Bryce Barnett (5 million shares).
Among Augusta’s assets is an 18.85% holding in NZX-listed Asset Plus Ltd, which on Tuesday reported a $14.7 million loss for the year to March, largely the result of a $19.1 million reduction in value of its investment property portfolio.
Property value drop drags Asset Plus into the red
NZX-listed property fund Asset Plus posted a $14.7 million loss for its 2020 financial year, dragged down by lower property valuations as a result of Covid-19.
Pre-Covid draft valuations valued its Graham St office property at $58.5m, its Stoddard Rd retail site at $42.5m, Eastgate Mall in Christchurch at $52.2m, and its bare land in Albany at $7.5m.
The updated post-Covid valuations reduced the expected worth of the properties to $50.1m, $37.5m, and $46.7m respectively, with no change to the value of the Albany land, where it plans to develop a new office asset to house Auckland Council.
All up, the valuations represent a non-cash loss of $19.1m across its portfolio.
Read the full article here (NBR paywall)
COMMENT: NZX data as at Friday 19 June 2020 shows the 52 week change in APL share price is -42%. The shares were trading at around $0.64 until mid January 2020 when they started to slide, dropping to $0.575 by the end of February. Then they went into free fall, hitting a low of $0.35 on 3 April and little changed at $0.37 today.
Provincia inspires confidence, says investor
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Retail interest rates on the RBNZ watchlistz
ASB senior economist Mark Smith says the Reserve Bank of New Zealand (RBNZ) has not ruled out the possibility of a negative OCR and has introduced a Quantitative Easing (QE) programme that looks to have been effective so far. Wholesale and retail interest rates have fallen and could move lower still.
But the true test, he says, will be how long-lasting its impacts will be. NZ retail lending and deposit interest rates remain on the RBNZ’s watchlist.
NZ’s economic recovery will not be population-led
With our borders closed and migration therefore having all-but dried up, there is no prospect of a population-led recovery for the New Zealand economy.
ANZ senior economist Miles Workman, in a forecast update on migration, said the Covid-19 crisis has turned New Zealand’s recent model of migration-driven growth “on its head”.
Migration-induced population growth has been “one of the most dominant drivers of economic activity in recent years,” he said.
Now with the overall weaker outlook for migration in the future, the prospect of a population-led recovery is slim.
“That will put the burden on domestic stimulus and productivity.”
He says that so far, the ANZ economists have “seen nothing on the policy front to convince us that productivity is about to take the reins”, so expect a “pretty ho-hum performance” on the “other side” of the Covid-19 crisis.
“Cutting the fat in the near term does boost productivity – at the unfortunate cost of jobs – but long-run productivity growth requires investment, innovation and risk taking.
Westpac says house price decline will be worse than the recessions of the 1990s
Housing prices may have peaked in March and begun a slow decline, according to the Real Estate Institute of New Zealand’s House Price Index (HPI).
The HPI for the whole of NZ peaked at a record high in March and then declined in April and May and is now 2.4% lower than in March.
The HPI was developed by the REINZ in association with the Reserve Bank and is considered a more accurate overall measure of housing price trends than either median or average selling prices, because it adjusts for differences in the composition of housing types that are sold each month.
Commenting on the HPI figures in a Home Truths newsletter, Westpac chief economist Dominick Stephens said the decline in prices was expected.
“New Zealand is staring down the barrel of a severe recession and house prices always fall during recessions,” he said.
“We expect house prices to decline less severely than during the Global Financial Crisis, but more severely than the early 1990s or late 1990s recessions.”
Valuers say bullshit and give an opposing view on house prices
Tony Alexander surveyed valuers to find out where house prices were going.
“Low to medium-end properties remain in high demand from both investors and first home buyers. The regions are holding up very well because of demand from those two groups. Buyers have definitely pulled back from new builds as have the banks.”
In answer to the question of whether the volume of off-the-plan construction valuations are rising or falling, Alexander says: “The picture is not a pretty one.”
“Valuers in both residential and commercial sectors are seeing fewer requests to give their assessment on properties proposed to be built. This tells us construction will be falling away in both sectors.”
“So far, Statistics NZ data tell us that in seasonally adjusted terms dwelling consent numbers have fallen by 8% over the past three months. But we have seen such falls many times before and the true pullback in house construction will not show through for some time.”
In answer to the question of whether prices are rising or falling at the moment, Alexander says: “And now we get something with some meat, even with just one month of formal survey results.”
A net 18% of residential valuers feel that prices are rising. “This is a very strong challenge to the prevailing view that average house prices are going down.”
“With regard to prices, we learnt early this week that average house prices around NZ, as measured by the REINZ’s House Price Index, fell by 0.5% in May after falling 1.7% in April. This 2.2% fall over two months is the biggest two-month decline since late-2008. Will it continue?
“Although there are a great number of investors and first home buyers in the market looking for properties, and although I believe the number of distressed sellers will be a lot smaller than people might think, it seems too early to say that average prices have bottomed out.”
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