Habitat kicks a nasty habit

By Bob Dey

Between the lines

Investors in listed shell Habitat Group, a onetime property company, found how to get share value in a sector which is mostly discounted when they pushed up the price on news that Habitat would become part of the e-commerce world.

Although physical asset backing is low at 1.8c a share, the share price got up to 28c before drifting back to around 19-20c. Turning Habitat into E-Phone Group still has to happen, but the idea is obviously what some punters want.

Staying in the traditional property sector, on the other hand, is a fine way to have a dismal future. Asset values don't tend to change often, returns are predictable and the market has a nasty tendency to discount how this predictability is managed by several per cent.

The discounting habit's most recent victim is Shortland Properties, where a new set of valuers brought in to assess the company's portfolio for a takeover appraisal knocked 8.8 per cent off a seven-month-old valuation by another firm.

Directors went along with the "market trend" line, although the market does not seem to have trended so harshly and a bigger portion of the removed $21 million of value may have come from specifics, namely a handful of vacancy concerns.

Market trend indications from Property Council figures show capital returns in Auckland's central business district down 3.96 per cent for the year to June and down 2.07 per cent for the second half of it. In Wellington, the falls for the same two periods were 5.57 per cent and 1.63 per cent.

Across the Shortland portfolio, a 2 per cent fall looks a reasonable representation of market trend this year, giving a drop of about $5 million. The rest of the fall can be attributed to other causes or should not have been made.

But if Shortland is typical of the property sector, there is need to feel concerned at the stated decline in a short period.

It shows the fragility of our market, extending to the businesses carried out in those buildings because their performance is the backbone of the property market.

A major cause of the decline may be the reduced reliance on doing business within the central city, in part a repercussion from last year's power crisis, in part a response to construction of more appropriate buildings around the fringe.

Outcomes could be a slowdown in central city office construction, continuing geographic spread of offices and an adjustment of land values between the two.

Alternatively, life in the city may not be so bad and city leaders will work out how to make the cbd a more attractive place to work and easier to get to.