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Stockland riding housing package stimulus boom but builders may hit capacity constraints

The country’s largest residential developer has seen a sales surge, but builders are scrambling to meet demand.

Stockland chief executive Mark Steinert. Picture: Jane Dempster/The Australian.
Stockland chief executive Mark Steinert. Picture: Jane Dempster/The Australian.

Property developer Stockland is riding a wave of confidence generated by government stimulus packages and low interest rates that has driven it to its strongest housing sales in more than three years.

The residential developer, considered a bellwether for the broader market, sold a net 1799 lots, in the quarter, calling out the improved credit availability and the Morrison government’s stimulus measures.

Chief executive Mark Steinert said sales in the company’s land estates were at “elevated levels” also citing the impact of pent up demand, government stimulus and a shift towards more spacious homes.

Stockland is also pushing more into logistics and has also flagged it will buy more land parcels on the outskirts of major cities to develop into housing estates.

But the company warned that lot sales had moderated slightly and the restricted capacity of builders to meet demand driven by the stimulus may hurt sales in this quarter.

The company completed 1083 residential settlements in the first quarter and had 4261 contracts on hand at the end of September.

But the company‘s retirement living unit was hit with a 9 per cent sales drop, which it largely put down to tight government restrictions in Victoria.

Excluding the state, the rest of the country was up by about 15 per cent over the quarter. The company is also pushing into a new budget land lease style of development for over 55 estates.

The company‘s residential head, Andrew Whitson, said there was increased buyer activity in all states, except Victoria, with WA and Queensland particularly strong. NSW is also trading well even though only 10 per cent of Stockland’s housing meeting the criteria for HomeBuilder.

Mr Whitson said inquiry levels continued above long term averages despite the Victorian restrictions and it is also building land lease communities at its existing sites at Aura in Queensland and Minta in Victoria.

Stockland reported that its office and industrial portfolio had high occupancy and rent collection approaching pre-COVID-19 levels, with particularly strong demand for logistics.

Stockland is pressing ahead with new office projects in the Sydney CBD and at Macquarie Park but noted there was a “preference emerging” for more balance in work between office and home and warned that this “may affect absorption of new office space in the medium to long term”.

The company’s closely watched retail portfolio had a sales recovery as foot traffic picked up again and stores reopened. Excluding Victoria, which is about 12 per cent of the retail portfolio, and a COVID-19 outbreak at a Sydney centre, comparable sales growth was 3.6 per cent for the quarter and comparable specialty sales growth was also positive at 1.7 per cent.

Stockland collected about 81 per cent of rents but cautioned that some shopping centre tenants would require abatements and deferrals this financial year but these are running at a lower level under the Morrison government leasing code, which will run till year end in most states.

The company has about $1.7bn of cash and undrawn bank facilities at the end of September and is continuing to expand particularly its industrial projects. But it has not provided earnings guidance citing the uncertainties generated by COVID-19.

Jefferies analyst Michael Vincent dubbed the update a “strong result” led by residential, which is benefiting from stimulus and other measures, and retail is doing well compared to peers.

Jefferies expect Stockland to be up in Tuesday mainly on the residential result, but cautioned that strong residential momentum unlikely to continue into fiscal 2022.

Macquarie analysts said the improvement in Stockland’s cash collection and operating metrics across the retail portfolio was a key positive.

“Residential sales were strong but is largely reflected in the share price. Additional stimulus measures in residential markets would be the next key catalyst for the stock,” Macquarie said.

Read related topics:Stockland
Ben Wilmot
Ben WilmotCommercial Property Editor

Ben Wilmot has been The Australian's commercial property editor since 2013. He was previously a property journalist with the Australian Financial Review.

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Original URL: https://www.theaustralian.com.au/business/property/stockland-riding-housing-package-stimulus-boom-but-builders-may-hit-capacity-constraints/news-story/4da3bfab5fce96e46d784a2806c332a5