Boost supply to cool housing heat, says Stockland chief

Fresh housing supply could stave off worries about rising prices, says the country’s largest listed housing developer.

Stockland chief executive Tarun Gupta. Picture: Jane Dempster.

Bolstering housing supply ahead of the restart of immigration could improve housing affordability, according to new Stockland managing director Tarun Gupta.

Mr Gupta, a 26-year veteran of global development giant Lendlease, has just taken the helm at the largest listed residential developer and is looking to bring some of his urban development smarts to the company.

Stockland is well known for its housing estates across Australia.

It has steered clear of the riskier investor market, as most of its homes are snapped up by first-home buyers.

House prices have leapt this year and the nation’s financial watchdogs last week revealed they were on alert amid signs of “increased risk taking” in the housing market.

Regulators are also exploring options to curb home lending.

Commonwealth Bank tightened home loan standards from Saturday, just days after regulators warned the sector over rising credit growth that had turbocharged housing markets. Other lenders are expected to follow.

Stockland warned of impending housing shortages but said these could be dealt with if the current round of developments was completed before a coming wave of post-pandemic migration hits.

“A lot of the heat currently is in established home prices, which is where price increases are coming through,” Mr Gupta said.

He added that ensuring supply would stop prices rising too high, which would create affordability problems and stop people getting into the market.

“We think supply needs to come in and kick in at the moment,” he said.

Mr Gupta predicted that demand would broaden from the hot outer suburbs and regional markets to major cities. “Over time, especially as immigration starts to come up in future years, there’ll be more demand, right across the market. Supply is very important to moderate prices, because affordability is good at the moment because of low interest rates,” he said.

“But we would like to keep it that way so that housing remains an affordable choice for Australians and especially younger Australians to enter the market and have a home.”

The chief executive said Stockland was well positioned as the company was the market leader in residential development. He cited its capabilities in creating master-planned communities, which differentiated it from many competitors.

“The market conditions are good,” he said.

“They have been very good for the last few months.

“I anticipate those conditions, especially for the owner-occupied product that we sell, (will) remain favourable.”

Mr Gupta said that drivers of growth and demand for housing included record low interest rates, which were “currently being flagged to continue”.

“That’s making getting into the market more affordable,” he said, adding that the market was also benefiting from government stimulus.

“Even though we don’t have migrants coming to the country at the moment we have had a lot of Australians returning back to the country who have supported, probably more the established home market, but that is still driving a halo effect on the market that we service,” he said.

He said outer suburban and regional markets were drawing people looking for larger homes and better amenities, partly due to the pandemic, which allowed for flexible working from home.

The Stockland chief pointed to the dominance of owner-occupiers rather than investors, who stoked regulatory concerns.

“In terms of macroprudential measures, at the right point, if markets are starting to overheat, those are very effective tools to ensure that homes remain affordable and speculators don’t come into the market,” Mr Gupta said.

But Stockland is focused on selling to people who live in its estates.

“We are selling a very large proportion of our homes to owner-occupiers who are really making the choice to come and live in our community. We don’t sell to a lot of investors and speculators,” he said.

Mr Gupta acknowledged that investors were becoming more active in apartments and medium density housing.

“People have more confidence and vacancies are starting to decline,” he said.

The Stockland chief flagged some concerns over the rising cost of building materials.

“There are certain trades and supply of goods that get impacted from time to time because supply chains are globally disrupted, and you do see some impacts coming through,” he said.

Mr Gupta cited the availability of timber for building as global demand surged, partly driven by the US, where a housing boom was under way. “It’s more supply-driven, rather than just a uniform increase in prices,” he said.

Stockland has also been exploring the land lease model for housing and sees an opportunity to pursue this in the 55-plus market. “That’s quite exciting,” Mr Gupta added.

He also sees strong growth opportunities in the logistics sector on the back of the e-commerce boom and remains a believer in city office towers, although the company’s plan is to build new-style green buildings.

The chief executive also called out the company’s very strong logistics capability.

Stockland also remains a believer in shopping centres with its regional portfolio proving relatively resilient in the face of the coronavirus pandemic.