Mirvac looks to living for earnings lift

The listed property developer is upbeat on the prospects for housing markets this year, despite having projects hit hard by rising costs.

A rendering of Mirvac’s Harbourside Residences development in Sydney.

Property developer Mirvac is back in the black after a healthy first half in which property values stabilised and it rode the recovery in the housing market.

The company believes it could be a winner from interest rate cuts, expected as early as next week, and from efforts to stimulate the housing market and boost supply.

Mirvac chief executive Campbell Hanan said the company had been successful at releasing land in inner urban areas, finding strong demand from owner-occupiers, with a kicker to come from rate cuts.

“I think interest rates will have a positive impact on housing markets, because it changes the nature of affordability very quickly,” Mr Hanan said. “One of the challenges for many first home buyers now is more than 50 per cent of their income is locked up in interest and principal repayments.”

Mr Hanan said that first home buyers had been really struggling to enter the housing market “so anything which helps them come into the market, I think, is a good thing”.

The Mirvac chief said that the challenges that had hit in construction over the last 18 months had made it hard for many developers to deliver high-rise products were starting to dissipate.

Developers were starting to see a little bit more competitive tension in the subcontractor market on major construction jobs in Sydney and Melbourne for the first time in 18 months to two years . “For the first time, we’re seeing some better pricing,” he said.

This will help across the industry with developers now able to complete projects profitably.

“There were some challenges in our own pipeline where margins have deteriorated because of the cost of construction increases,” he said. “We’re now starting to see better return profiles again.”

Mirvac flagged its projects in Sydney had strong sales and it is setting up partnerships with capital backers to expand in the area and in the hot industrial market.

The company made a $1m profit for the period as it turned around from a $201m loss in the previous first half when it was hit by writedowns on its commercial portfolio.

While Mirvac’s operating profit after tax slipped by 6 per cent to $236m, it is advancing on both new residential projects and commercial precincts.

It is on track to deliver full-year guidance of between 12c and 12.3c per share if housing sales stay strong, it sells off about $500m of non-core assets and debt remains steady.

The company pointed to strong housing sales with 947 residential lot sales, a 51 per cent jump on the same time last year, which included the launch of Harbourside Residences in Sydney.

Mirvac’s commercial projects, including 55 Pitt Street and Aspect Industrial Estate, both in Sydney, also advanced. There was occupancy of 96.2 per cent across the portfolio and positive re-leasing spreads as tenants signed up to higher rents.

The company has also been selling off non-core assets, including offices in Melbourne, and its gearing was down to 26.3 per cent. It is also expanding its build-to-rent holdings, including LIV Aston in Melbourne, and it has three new estates in its land lease portfolio.

Mirvac said it was focused on setting up partnerships in its residential business to allow it to unlock value from its development pipeline and improve returns while also getting more homes into the under-supplied housing market.

Mirvac chief executive officer and managing director Campbell Hanan. Picture: Nikki Short

The company said it planned on getting between 2000 and 2500 residential lot settlements, non-core asset sales and securing capital partners at key development projects, as well as keeping debt costs steady to hit its guidance.

“Our results signal the beginning of a market turnaround, and we are starting to see real benefits from the execution of our strategy,” the company said.

“We are well positioned to capitalise on a recovery across all parts of our business, supported by falling inflation and signs interest rates will start to ease in the near future.”

Mirvac shares added 10c to $2.10.

Jarden analysts said the result was ahead of consensus expectations at the headline level. “Residential lot settlements are a little weaker than expected, but sales momentum has picked up. This sets up the group for higher volumes in the second half of 2025, even if Mirvac has flagged lower margins for some time,” Jarden said.

The analysts said trusts exposed to the housing market had outperformed as the market moved to price in a Reserve Bank rate cut next week.

The company’s earnings per security dropped by 6.3 per cent year-on-year to 6c, which was ahead of market expectations, while the distribution per security was flat at 4.5c.

Bell Potter said it looked like a solid result, with Mirvac’s earnings and distribution per security beat underpinned by the residential sector performance.

The company had the highest presales since 2018 and gross margins ticked up to 19 per cent, even though the company called out “productivity-challenged” projects in Queensland.

Originally published as Mirvac looks to living for earnings lift