Jeremy Hutton: Milford Asset Management expert on the listed retirement sector struggling in 2026

Recent reports indicate the listed retirement sector in New Zealand has continued to struggle in 2026.

Share market expectations were high in the new year, but the predicted growth has since turned flat and negative.

Milford Asset Management expert Jeremy Hutton explained further.

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Episode Transcript

Speaker 1 (00:00):
Now Jeremy Hutton Milford ACIDT Managements with us ALO.

Speaker 2 (00:02):
Jeremy, Hi, Heather, here are you going very well?

Speaker 1 (00:05):
Thank you? Know, as we've spotted obviously, the listed retirement
sector has really been struggling this year as well. What's
going on here is at the house prices.

Speaker 2 (00:13):
Yeah, I'm in share price returns for the largest listed
retirement names on the INSIDEX do make for some fairly
ugly reading so far in twenty twenty six. I mean
you've got Somerset down twenty eight percent, Ryman down twenty
seven percent, Oceania down nineteen and to be fair, I
mean expectations were pretty high coming into this year. I

(00:34):
mean you had the local economy performing better, and house prices,
which traditionally have been a really key driver of performance
for the retirement names, were expected to bounce back after
a few stagnant years, and you had bank economists out
there forecasting growth for this year of around four to
five percent. But that consensus has come back materially as

(00:57):
the years progressed. You've got expectations of house prices somewhere
between flat and negative at the moment, and we had
the June Real Estate Institute numbers out today and again
i'd say disappointing data, particularly on the house price front
and particularly in Auckland. So yeah, I mean no question
that the housing market has been weighing on returns in
the retirement sector this year.

Speaker 1 (01:17):
Okay, So without the house price gains, what is it
that investors looking for? Is it something different from these companies?

Speaker 2 (01:24):
Yeah, it is, and the sectors realize this, and it's
going through a bit of a painful transition and its
business model. I mean, as I mentioned earlier, I mean
traditionally the house price gains had delivered big returns for
the sector, and investors encourage this to be fair. I mean,
during the hot housing market period, investors wanted a lot
bigger bill programs, a lot new units. We're happy for

(01:47):
them to take on debts and grow their asset values.
But now that's flipped pretty quickly around the other way.
The message from the market now is stop building or
reduce it materially, cut your debts and only some real
cash flow from the underlying business. And unfortunately, in the sector,
it's not a transition and model you can make overnight,

(02:08):
and it will take a number of years to play out.

Speaker 1 (02:10):
Okay, So I mean should we be worried about the
fact that they are reducing the rate of building.

Speaker 2 (02:15):
I mean, I think it's something for retirees to consider,
and even New Zealand as a whole. I mean, we
know there's enormous demand coming driven by this aging population,
and at the same time, the sector is pulled back
materially on new build supply just as this demographic wave
is coming. And in most markets, when limited supply meets

(02:37):
the strong demand, it's usually not a good recipe for
affordability and pricing. And then in the age care segment,
this hospital level high needs care that these private retirement
operators provide. It has relieved a lot of pressure on
the public hospital system and if these private beds get
genuinely scarce, then that release volve for the public hospital

(02:59):
system might not be there. So, you know, just something
to watch as we go through.

Speaker 1 (03:04):
That's a very good point that you make, Jeremy. Thanks
very much, Jeremy Hutton, Wilford Asset Management. For more from
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