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Jeremy Hutton: Milford Asset Management expert on the listed retirement sector struggling in 2026 · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk zed be
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  Speaker 2: Now Jeremy Hutton, Milfit Aid Managements with Us. Hello, Jeremy.
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  Speaker 3: Hi Heather here are you going very well?
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  Speaker 2: Thank you? Now, as we've spotted obviously the listed retirement
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  Speaker 2: sector has really been struggling this year as well. What's
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  Speaker 2: going on here is at the house prices.
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  Speaker 3: Yeah, I'm in share price returns for the largest listed
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  Speaker 3: retirement names on the INSIDEX do make for some fairly
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  Speaker 3: ugly reading so far in twenty twenty six. I mean
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  Speaker 3: you've got Somerset down twenty eight percent, Ryman down twenty
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  Speaker 3: seven percent, Oceania down nineteen and to be fair, I
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  Speaker 3: mean expectations were pretty high coming into this year. I
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  Speaker 3: mean you had the local economy performing better, and house prices,
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  Speaker 3: which traditionally have been a really key driver of performance
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  Speaker 3: for the retirement names, were expected to bounce back after
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  Speaker 3: a few stagnant years, and you had bank economists out
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  Speaker 3: there forecasting growth for this year of around four to
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  Speaker 3: five percent. But that consensus has come back materially as
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  Speaker 3: the years progressed. You've got expectations of house prices somewhere
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  Speaker 3: between flat and negative at the moment, and we had
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  Speaker 3: the June Real Estate Institute numbers out today and again
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  Speaker 3: i'd say disappointing data, particularly on the house price front
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  Speaker 3: and particularly in Auckland. So yep, I mean no question
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  Speaker 3: that the housing market has been weighing on returns in
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  Speaker 3: the retirement sector this year.
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  Speaker 2: Okay, so without the house price gains, what is it
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  Speaker 2: that investors looking for? Is it something different from these companies?
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  Speaker 3: Yeah, it is, and the sectors realize this, and it's
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  Speaker 3: going through a bit of a painful transition and its
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  Speaker 3: business model. I mean, as I mentioned earlier, I mean
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  Speaker 3: traditionally the house price gains had delivered big returns for
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  Speaker 3: the sector, and investors encouraged this to be fair, I mean,
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  Speaker 3: during the hot housing market period, investors wanted a lot
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  Speaker 3: bigger bill programs, a lot new units. We're happy for
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  Speaker 3: them to take on debt and grow their asset values.
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  Speaker 3: But now it's flipped pretty quickly around the other way.
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  Speaker 3: The message from the market now is stop building or
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  Speaker 3: reduce it materially, cut your debts and show me some
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  Speaker 3: real cash flow from the underlying business. And unfortunately in
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  Speaker 3: the sector, it's not a transition and model you can
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  Speaker 3: make overnight, and it will take a number of years
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  Speaker 3: to play out.
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  Speaker 2: Okay, So I mean, should we be worried about the
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  Speaker 2: fact that they are reducing the rate of building.
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  Speaker 3: I mean, I think it's something for retirees to consider,
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  Speaker 3: and even New Zealand as a whole. I mean, we
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  Speaker 3: know there's enormous demand coming driven by this aging population,
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  Speaker 3: and at the same time, the sector is pulled back
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  Speaker 3: materially on new build supply just as this demographic wave
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  Speaker 3: is coming. And in most markets, when limited supply meets
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  Speaker 3: the strong demand, it's usually not a good recipe for
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  Speaker 3: affordability and pricing. And then in the age care segment,
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  Speaker 3: this hospital level high needs care that these private retirement
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  Speaker 3: operators provides, it has relieved a lot of pressure on
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  Speaker 3: the public hospital system and if these private bids get
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  Speaker 3: genuinely scarce, then that release valve for the public hospital
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  Speaker 3: system might not be there. So, you know, just something
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  Speaker 3: to watch as we go through.
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  Speaker 2: That's a very good point that you make, Jeremy. Thanks
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  Speaker 2: very much, Jeremy Hutton, Lilford Asset Management.
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