Property stocks pull NZX 50 lower

Every property stock listed on the NZX fell today after Precinct Properties told shareholders that rent abatements were costing about $500,000 per week or 3% of its rental income.

Thursday, November 4th 2021, 6:53PM

by BusinessDesk

The S&P/NZX 50 Index fell 50 points, or 0.4%, to 12,943.94. Turnover was $149 million.

Precinct’s chief executive Scott Pritchard said the company was giving some retailers free rent during the lockdown but even that hadn’t stopped some closures.

The property investment firm is one of the largest owners of inner-city office and retail space in Auckland and Wellington.

Earlier this week, equity analysts at investment bank Jarden warned the favourable low-interest-rate monetary policy that has been helping the sector was drawing to a close.

The analysts trimmed between 3% and 5% from their valuations of property stocks in reaction to increasing bond yields which reduce the relative yield on property portfolios.

Retirement village operator Summerset Group Holdings – not strictly a property stock – led the decline today – falling 2.4% to $14.

Argosy Property dropped 1.9% to $1.515, Goodman Property Trust units were down 1.8% at $2.405, Kiwi Property Group fell 1.7%, and Precinct Properties declined 0.6% to $1.60

The other five NZX-listed property vehicles were also trading between 0.3% and 1% lower today.

Some investors may also have paid attention to former Reserve Bank of New Zealand (RBNZ) chair Arthur Grimes who said a decade of very low interest rates could lead to an asset price crash.

The RBNZ itself gave a similar warning yesterday, saying highly leveraged home buyers could be in trouble if property prices fall when interest rates go up.

Interest rate traders are now pricing a decent chance of a 50-basis-point hike at the next meeting and expect the official cash rate to hit 2% by next August.

Elsewhere in listed equities, steel companies had a strong day with Vulcan Steel going public at A$7.10 this afternoon after Steel & Tube Holdings reported a 14% jump in revenue.

Vulcan Steel closed up 0.9% at $7.50, after trading as high as $7.69, while Steel & Tube was up 1.6% at $1.25. Fletcher Building, which also distributes steel, slipped 0.3% to $7.16.

The NZ dollar was trading at 71.67 US cents today, up from 71.21 cents yesterday as it gained on this week’s strong employment data.

Tags: Market Close