Ryman caught by property slump as retirement village sales disappoint
Monday, 19 February 2024
Some people intending to sell their homes to move into retirement villages are holding fire until property prices recover, Ryman Healthcare says.
The developer and operator of Retirement villages posted a trading update on the NZX telling investors the dearth in buyers was going to cut $35 million to $45m off its expected underlying profit for its current financial year to March 31.
Underlying profit was now expected to be in the “disappointing” range of $265m to $285m, said Ryman group chief executive Richard Umbers, far lower than the underlying profit of $302m in its last financial year.
Ryman had expected to sell 273 occupation rights agreements (ORAs) for units in its retirement villages in the six months to the end of March, but only now only expected to have sold 218.
ORAs give residents the right to live in a village unit, and most people buy them using a portion of the sale proceeds from their homes.
When they leave, often to move into residential care, or on their deaths, they or their estates get back their original capital minus a deferred management fee, usually 20% at Ryman, though other village as much as 35%.
Umbers said some house buyers and sellers hold off during softer market conditions.
“We need people to be able sell their existing properties to buy into retirement living,” he said.
The pattern of housing market performance had been patchy from the end of 2022. Prices and sales volumes in cities, and Auckland in particular, have not fully recovered, he said.
“We have quite a lot of stock for sale in Auckland,” he said.
It appeared that people were also less willing to move into sites where there was still major building work underway.
Umbers said serviced apartments in particular were taking longer to sell than anticipated at villages where the business was yet to complete its main buildings.
“Our current build programme is unusually weighted towards four main buildings, which are nearing completion and form a key part of our resident value proposition.
“Although we have stock available to sell, a combination of market conditions and the expected phasing of main buildings will see sales deferred into FY25.”
The longer-term prospects for retirement living remained strong as the population continued to age, and to get wealthier, Umbers said.
Ryman, whose villages were home to 14,200 residents and which employed 7600 staff, has seen its shares fall just over 9% in the past 12 months.
Umbers did not think the sales slump owed anything to a government review of the laws governing retirement villages
There has been an ongoing fight since 2022 by villages residents for reform of the laws and contracts governing retirement villages.
They took their fight to Parliament’s Social Services and Committee select committee in 2022, ultimately winning MPs’ support for a review, despite protests from village operators.
The Government’s Housing and Urban Development agency is reviewing the sector, prompted by calls from residents and Retirement Commissioner Jane Wrightson.
The review is looking at whether the law should impose standard contracts on villages, and limiting some of the fees some villages charge.
TIMELINE TO A REVIEW
2003: Retirement Village Act established.
2006: Disputes scheme set up for residents to complain to.
2008: Retirement Villages Code of Practice created under the act.
2020: Te Ara Ahunga Ora The Retirement Commission called for review of retirement village laws.
2021: Retirement Village Residents Association published its “ Framework for Fairness”.
2022: Retirement Villages Association published its “Blueprint” to make voluntary changes. Residents took their plea for a review to Parliament.
2023: In August, the Ministry of Housing and Urban Development invited submissions to its review.
2023: In November, submissions closed.