Lend Lease has reported a steep drop in demand for apartments in its Victoria Harbour precinct in Melbourne’s Docklands, with interim results boosted by its largest project, the $6 billion Barangaroo South project.
The property developer and infrastructure developer announced interim after tax profits up 38.3% to $302.3 million to December 31.
Lend Lease explained that the increase in profit was “largely due to the recognition of the profit on the first two commercial towers at its major project, Barangaroo South in Sydney".
However, it noted that its development business had been partially offset by “reduced residential activity in the period”.
The outlook for its residential business is mixed, with Lend Lease noting that consumer sentiment towards the housing market "improved slightly in the period, with mortgage affordability increasing due to lower interest rates, steadier house prices and rising income" but at the same time "low consumer confidence and uncertainty in the labour market has lessened the impact on sales".
Off-the-plan apartments sales fell 29% from 710 sales in the December 2011 half year to 502 for the six months to December 2012.
Lend Lease recorded 10 apartment settlements totalling $10.4 million over the six-month period – representing an average price of $1.04 million, compared with 17 sales totalling $33 million (average price of $1.94 million) in the previous corresponding period.
Lend Lease says the fall of 47% "reflect[s] the change in the product mix from premium apartments to smaller, more affordable apartments in response to changes in market demand".
The previous period included settlement of a higher number of high value apartments.
Residential lot sales fell 10% from 1,625 to 1,460, with the average price per residential lot decreasing by 17% from $243,850 to $201,500, "reflecting a change in the product mix".
Lend Lease has 37 residential projects at various stages of development with a pipeline of 69,000 units.Click to enlarge
Lend Lease also reported off-the-plan sales of 121 out of 203 apartments released in its Studio Nine development in Richmond (pictured below), which will feature 505 apartments and townhouses when completed on the heritage site that was once the Heinz canning factory, and then a broadcast studio.
Lend Lease had offered very high 10% interest rate on deposits paid for apartments in Studio Nine, with apartments priced from about $455,000 to $1.85 million
Construction commenced on Wertheim Square apartments in Stage 1 of Studio Nine in November.