RBNZ predicts NZ house prices to eventually drop- A glance at 5 NZX real-estate shares

Highlights

  • Real estate stocks have been attracting investor attention after witnessing COVID-19 blows.
  • RBNZ announced that house prices are expected to eventually decline as housing market momentum slows down.
  • Asset Plus, CDL Investments, Property for Industry, have been showing positive results.

On 19 August, Reserve Bank Governor Adrian Orr stated in prepared remarks for a meeting of the Finance and Expenditure Committee that New Zealand's home prices were above a level that was sustainable considering the housing supply and demand position.

The underlying demand for housing has dropped substantially due to low population growth since the COVID-19 outbreak. On the other hand, house building has reached significantly high levels and mortgage interest rates are increasing.

The Bank has projected a price decline for the first time since house prices soared in 2020. House price rise will decelerate and finally become negative, as per the bank’s predictions.

Source: Copyright © 2021 Kalkine Media

In its latest monetary policy meeting on 18 August, RBNZ kept the official cash rate on hold at 0.25%, abandoning market expectations of a rise in interest rate from 0.25% to 0.5%. However, the bank opted to hold the OCR in response to the news of the current national level 4 lockdown, maintaining lending costs low and supporting the economy.

Amid this backdrop, Let’s have a look at the performance of these 5 real estate shares.

CDL Investments New Zealand Limited (NZX:CDI)

CDL Investments, a premium residential segment producer, released its half-year results on 2 August. The Group reported an operating profit of $20.75 million and a revenue of $61.27 million for H1 ended 30 June 2021 showing positive strength across NZ’s property segment.

Recommended Read: CDL Investments reports strong growth in first half of 2021

CDI has also been assessing many acquisition prospects in various locations.

On 19 August, CDI ended the trading session flat at $1.145.

Argosy Property Limited (NZX:ARG)

Argosy Property, an NZ-based property manager, extended its syndicated bank facilities of $215 million. The bank facilities were with BNZ, ANZ, Hong Kong and Shanghai Banking Corporation, Westpac NZ and CBA.

The entire amount of the bank facility has also been reduced by $35 million, from $490 million to $455 million. Argosy's total funding tenor is currently 4.1 years.

On 19 August, ARG ended the trading session at $1.61, up 1.58% from its previous close.

Asset Plus Limited (NZX:APL)

Asset Plus is an NZ commercial property investor.

In FY21, the company recorded a net profit of $15.95 million, up from a loss of $14.69 million in prior year. Due to decreased due diligence, expenses and the tax benefits of obtaining building depreciation, APL's adjusted funds from operations increased to $5.82 million from $4.74 million.

RELATED READ: Fletcher Building (NZX:FBU) The Company is riding high on positive FY21 results

It paid a final dividend of 0.45 cps on 11 June, taking the total dividend to 1.8 cps for the year.

On 19 August, APL ended the trading session flat at $0.33.

Property for Industry Limited (NZX:PFI)

Property for Industry Limited is a specialist in industrial property. The Company refinanced its syndicated bank facility ($300 million) and also broadened the Company's facilities by $100 million more with BNZ in July.

RELATED READ: Which are the best real estate shares on NZX?

The Company will release its six-month results for the period ending 30 June 2021 on 20 August.

On 19 August, PFI ended the trading session at $2.93, up 1.03% from its previous close.

Kiwi Property Group Limited (NZX:KPG)

Kiwi Property Group, property investor and asset manager, informed the market on 2 August that the final quotation day for Kiwi Property Group Limited ( “KPG010”) is 20 August 2021.

The final day of trading in KPG010 was disclosed as 6 August before the bonds were suspended.

On 19 August, KPG ended the trading session at $1.17, up 2.63% from its previous close.

Bottom Line

Building consent statistics show that the overall number of dwellings will be rising at its highest rate by mid-2022 since the data started getting recorded in the early 1960s. Housing prices are likely to be pushed lower by continued robust house construction.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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