Sales slow in the Sutherland Shire as Australand identifies several residential weakspots
Rain delays has prompted Australand to reduce its targeted lot sales in its Greenhills Beach residential development in the Sutherland Shire from 170 to 135 for 2012.
And sales at Clyde North, its Melbourne greenfields project, have also slowed, with south east Queensland sales still at historical lows.
But the property group's sales was quite resilient in its $89 million full year net profit after tax representing a six percent boost.
The Greenhills Beach project, two kilometres from Cronulla, has land priced from $690,000 with beach lots priced from $845,000 and lakeside lots priced from $850,000
Despite the lot sales slowdown, Greenhills Beach remains among Australand’s top 10 residential projects and is listed as one of the project contributing to the strong first-half year result from its residential division.
Australand has also downgraded lot sales expectation in it Clyde North project on the outskirts of Melbourne with 140 lots expected to be sold in 2012 financial year compared to previous forecasts of 168.
In relation to both these projects, Rod Fehring, head of residential at Australand, said strong earlier momentum in both these projects had seen the developer release lots to the market earlier, but anticipated stronger sales had not eventuated.
The Clyde project has been impacted by the overall weaker state of the Melbourne market while the Shire project had been impacted by rain delays.
Overall, Australand identified South East Queensland and Melbourne as the two most challenging residential markets as it reported a 12% rise in revenue from its residential businesses to $260 million for the six months to June 30.
Lot sales declined to 489 compared to 605 in the corresponding period last year but contracts on hand increased from 605 and 824.
The average value of lot sizes were higher than the previous period.
The strongest performing residential project were Cockburn Central (WA), Kangaroo Point (Queensland) and Parkville (Victoria) with key contributions from residential land projects in Greenhill Beach (NSW) and Greenvale (Victoria).
The residential division now holds 1,316 contracts in hand as of June 30, an increase of 40 % more than the 951 contracts held at the end of December with Australand expecting 59% of these contracts to be realised in the second half of the year.
Australand managing director Bob Johnston said solid momentum from 2011 had been carried into 2012, but “consumer clearly remained cautious and house prices have eased.
Fehring described the Melbourne market, where Australand has 54% of its projects, as one that has now ticked over into “mild oversupply” although this oversupply is not “uniformly spread” with activity impacted at the lower end of land markets and high-end discretionary markets.
He says sentiment has softened with a weaker employment outlook, while the ending of first-home buyer concessions had also pulled demand forward and is expected to impact on the market in the future.
But he says "earnings resilience" is being supported by the diversity of the projects in its pipeline with its Point Cook project among the top performers
Australand has 11 Victorian projects underway with over 500 contracts in hand, including projects in Carlton and Cranbourne West.
Australand has only a small exposure to the South East Queensland, where 9% of its residential projects are located.
It says activity levels in this market remain at historic lows with interstate migration remaining low though affordability has improved relative to other markets.
Its inner city projects at Kangaroo Point and Hamilton have been among the stronger performers which are attracting enquiries and sales.
Australand has stuck with its forecast of 48 lots sales at Kangaroo Point for the financial year with an average expected price of $980,000
Australand says WA, where it has 14% of its projects, is showing improved fundamentals.
“Perth market fundamentals have improved significantly, listing have normalised with vacancy rates tightening,” says Fehring.
Across the entire residential portfolio, Australand is targeting 15 to 20% rise in earnings before interest and tax for the second half of the year, underpinned by strong contracts that will close in this period.
It also re-affirmed full year distribution guidance of 21.5 cents, but said this was dependent on sentiment not weakening further.
For the half year to June 30, Australian reported a 5% rise in operating profit compared to the same period last year.
Johnston called this a “credible result” given the weak consumer sentiment.
“Trading conditions across the board remain challenging,” he said.
Australand reported statutory profit of $90 million for the half year compared to $85 million in the corresponding previous period.
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