Property values hit Metlifecare
A knock-on effect of the slowing property market has seen an end to the ‘‘spectacular growth’’ in asset values at retirement village Metlifecare.
The company, which has 24 villages, has posted an interim net profit of $56.4 million for the six months to December 31, down 65 per cent from $165m the year before. Metlifecare chief executive Glen Sowry said the price paid for houses was directly linked to what people could afford to pay for a retirement unit, and that affected Metlifecare’s asset values.
‘‘Over the last two or three years, we saw particularly strong house-price inflation, especially in the upper North Island, and that translated into significant valuation uplifts on our portfolio of villages. So we were essentially booking paper gains in terms of net profit after tax.
‘‘I think everyone will acknowledge and accept that that level of increase is unsustainable, and needed to return to more normalised levels.’’
The company is still forecasting its underlying net profit to be at least at last year’s levels, despite a $44m weathertightness repair programme over the next seven years to fix more than 100 units with cladding or balcony problems.
About 70 units are in Kapiti and the rest in Auckland. The first-half results included the cost of buying back 41 of its own units to temporarily house residents whose units needed repairs.
But the company would make back some money from a string of new units due to be finished in the second half of the year, Sowry said.
Nevertheless, Metlifecare’s interim revenue was up nearly 5 per cent to $56.6m. Sales of new units fell 62 per cent to $21.6m but resales were up 3 per cent to $80.6m. Both were supported by ‘‘significantly higher’’ margins.
Sowry said the company was completing about one village a year on time and budget.
Occupancy levels at its villages were 98 per cent.