In New Zealand, retirement villages are regarded as ‘investment properties’ and are required to be valued each year. Most village operators utilise CBRE to do the valuations who each year historically apply a simple 3% increase (given the strength of the NZ market).
This year however CBRE has revised valuations down 2%, equating to a combined 5% reduction in the value of village assets. They also predict next year will be flat – equating to another 3% missed increase in valuations.
The impact is big. For instance, Oceania Healthcare was hit with a $22.5 million valuation resulting in an after-tax loss of $13.6 million, down from a $45 million profit the year before, boosted by a $34 million valuation gain.
Will this undermine balance sheets and optimism to commit to new village development in Australia?