Ryman Healthcare doesn’t expect housing market downturns in Melbourne and possibly Auckland will affect it.

Residential property prices in Melbourne have dropped 4.7 percent in the past year while Auckland prices have been flat to slightly down.

Chief executive Gordon McLeod says prices in the two cities would have to drop 20-30 percent before there would be any affordability issues for people buying an independent-living townhouse in one of Ryman’s retirement villages.

Independent-living units account for about half Ryman’s portfolio with about 30 percent of the other half being serviced apartments and the rest being hospital or dementia care beds.

For a potential resident looking at buying a serviced apartment, usually because of some adverse life event such as worsening health, the cost is about 50-60 percent of the house they’re selling.

Those people tend to be 85 or older while those buying independent units tend to be 78-79.

“It’s really only with half our portfolio that the housing market is at all relevant,” McLeod says.

“Most residents have had some event in their lives and those sorts of events don’t change just because the property market changes.”

For the majority of residents, the most important factor is that Ryman offers a continuum of care and so they will never have to move out of the village they buy into, he says.

Ryman’s history bears out what McLeod is saying. During the GFC, transactions in the New Zealand housing market dropped by two-thirds and house prices fell 10 percent but “the stuff of life continued” and Ryman’s profitability continued to increase.

The company has just reported a near 14 percent rise in first-half net profit to $97.1 million, excluding property valuations, and is forecasting a full-year result 10-17 percent higher than last year.

McLeod told analysts the actual annual result will depend on sales of new units and re-sales of existing ones.

In the six months just gone, Ryman re-sold 405 existing units, up from 394 in the same six months last year, and 168 new units compared with 157 in the year-earlier period.

Ryman currently has a pipeline of 16 new villages, nine in New Zealand and seven in Victoria, and has committed to having five villages open in the wider Melbourne area by 2020.

Analysts noted that it took from 2014 when Ryman opened its first village in Melbourne, Weary Dunlop, until August this year before the first residents moved into its second village in that city, Nellie Melba.

McLeod says while the process of building the second village at Brandon Park was frustrating for both his company and its investors, Ryman has learned a lot in the process.

The company has construction about to start at two more villages in Melbourne and a number of development applications in the pipeline and is “building momentum” to achieving its target, although he joked that might stretch to New Year’s Eve in 2020.

Ryman shares are trading at $11.69, up 19 cents and have gained 10 percent year-to-date compared with the benchmark NZX 50 Index’s 3.9 percent gain, although they down from their record high at $14.09 on Aug. 31.

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