GMT, PCT & KPG: 3 real estate stocks to watch as inflation hits 6.9%

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GMT, PCT & KPG: 3 real estate stocks to watch as inflation hits 6.9%

 GMT, PCT & KPG: 3 real estate stocks to watch as inflation hits 6.9%
Image source: Alexander Raths,shutterstock.com

Highlights

  • A rise in inflation of 6.9% will impact the property market.
  • The RBNZ will increase the OCR rate, further leading to interest rate hikes
  • Borrowers will feel an impact on their budgets as mortgage interest rates will also increase.

Inflation has further risen to 6.9% in New Zealand, according to figures released by StatsNZ. This could mean that the Reserve Bank will increase the official cash rate (OCR) based on the latest Consumer Price Index (CPI) in its latest policy meeting. This will mean that banks will also adjust their interest rates.

So, if you are a borrower, it will impact your daily budget. For a homeowner, it could affect the mortgage interest rate. It could also impact your return on investment for your savings account. If you are on a rented property, the landlord may adjust the rent.  

Overall, while inflation has been driven by housing, it, in turn, will impact the housing sector further.

Against the backdrop of rising inflation, let’s examine 3 NZX-listed real estate stocks: 

Real estate, inflation, PCT, GMT, KPG

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Kiwi Property Group Limited (NZX:KPG)

KPG recently increased its FY22 dividend guidance, following expectations of a strong Q4.

Due to its diversified portfolio, the Company was resilient to the impact of Omicron and red traffic settings. As a result, it expects to improve its performance in the last quarter of FY22. KPG now expects to pay a dividend of 5.6 cps for FY22 from the 5.3 cps guidance previously announced. The Company has been a consistent dividend payer despite COVID-19-related losses incurred by the Company.

The expected improvement in financial results is due to rental growth achieved in the mixed-use property for the whole year. Recently, it also appointed Joanna Harris as its new GM, People. Her experience is expected to help the Company evolve as a builder of mixed-use property.

On 21 April, the stock was down by 0.46% at NZ$1.075, at the time of writing.

Goodman Property Trust (NZX:GMT)  

GMT is a leading property player in NZ. It launched its green bonds recently to raise equity to fuel its expansion plans. It also plans to use proceeds of the offer to refinance existing bank debt. Lately, it also announced the acquisition of the Sky Television campus for NZ$56 million. This purchase complements the existing portfolio of KPG and it plans to develop it as a logistics estate that would provide value to Auckland areas.

On 21 April, the stock was up 1.74% at 2.34, at the time of writing.

Also read: Goodman (NZX:GMT) obtains a development contract with NZ Post

Precinct Property New Zealand Limited(NZX:PCT)

PCT is a developer of premium properties across New Zealand. Recently, it announced its plans to offer Green Bonds for a period of six months to institutional and retail investors in NZ.  Full details of the offer will be released in the last week of April 2022 when the offer is expected to open.

ANZ Bank NZ Limited will be its lead Arranger and coordinator. Green Bonds are expected to be quoted on the NZX Debt Market. Earlier on 23 March, PCT announced that it had entered into a strategic investment partnership with Singapore sovereign wealth fund, GIC. The partnership will initially acquire five properties from PCT’s existing portfolio in Auckland and Wellington totaling around NZ$590 million. It plans to grow it to over a billion.

On 21 April, the stock was trading down by 0.64% at NZ$1.550, at the time of writing.

Bottom Line: There are many signs that the NZ property market is slowing down in terms of prices. However, it’s going to be a bad time for the borrowers as interest rates rise. The first-time borrowers may find it tough to handle the new mortgage rates.

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