Stockland calls residential recovery as home sales pick up
The nation’s biggest residential property developer, led by Tarun Gupta, says we are in the early stages of a recovery.
Business
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The country’s largest residential property developer Stockland is seeing signs of recovery in demand for housing and has kept its earnings guidance intact.
Housing developers have faced rising costs and a fall off in volumes due to higher interest rates, but Stockland believes that it is well positioned over the medium term.
Chief executive Tarun Gupta said the housing unit showed continued improvement over the quarter, with net sales over the period of 1,049 lots and enquiries returning to pre-Covid-19 levels.
In the company’s growing land lease communities business, upcoming project launches are backing up elevated enquiry levels, showing ongoing demand for this kind of living.
“Stockland has delivered a strong operational result for the quarter, again demonstrating the strength of our diversified portfolio against a backdrop of continued macroeconomic uncertainty,” Mr Gupta said on Wednesday.
The developer’s diversified operations are helping it.
“We achieved strong operational performance across our commercial property portfolio, including accelerated rental growth in our rapidly expanding logistics portfolio, and double-digit sales growth in our town centres portfolio while maintaining positive leasing spreads,” he said.
Stockland expects sales volumes to improve as the interest rate outlook stabilises, and default rates remain below historical levels, albeit up over the quarter.
In an encouraging sign for the industry, Stockland said the rate of construction cost escalation continues to moderate as supply chain constraints ease.
After a run of construction company collapses, Stockland said it was monitoring the financial health of home builders and working with them to control production and delivery risks.
The land estate business ended the period with 6,443 contracts on hand at 12 per cent higher average pricing than at the same time last year.
Stockland kept its fiscal 2023 settlement targets at about 5,500 settlements, with a significant settlement skew to the final quarter.
About 3,000 settlements are expected to complete in this quarter, and the development operating profit margin is expected to be 26 per cent.
Citi analysts said there was a continuation of recent trends with residential sales down year-on-year and continued strong industrial leasing spreads, along with strong sales growth and leasing outcomes in the essentials-based retail business.
“However, we view the sharp pick-up in residential enquiries in [the March quarter] – up circa 50 per cent from the first half of fiscal 2023 run-rate and in-line with pre-Covid levels – as an early sign of a recovery in demand,” they said.
Stockland shares were up 2.1 per cent to $4.36, giving it a market value of $10.41bn, in a slightly lower market on Wednesday afternoon.
Originally published as Stockland calls residential recovery as home sales pick up
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