Stockland to charge up to 10pc more for homes this year
Stockland said it expected to sell homes for up to 10 per cent more this year than in the year to June with growth strongest in the land lease communities business targeting downsizers.
Even as it warned that market conditions remained “uncertain”, the ASX-listed developer, landlord and investor said housing prices in its core master-planned communities business would average 5-10 per cent more this financial year than in the previous.
Prices of homes in its smaller – but fast-growing – land lease communities business were rising faster, with the 420 contracts on hand at end-September up 9 per cent on average from the average 2023 settlement price, the company said.
“Underlying demand for our master-planned community product is solid, and we remain positive on the medium-term residential outlook, with the rebound in net overseas migration supporting demand amidst ongoing constrained land supply,” chief executive Tarun Gupta said in a speech at the company’s AGM on Monday.
Stockland held its earnings guidance from August of pre-tax funds from operations – an industry measure of earnings – between 34.5¢ and 35.5¢ per security this year and its guidance for a dividend payout ratio of 75 per cent to 85 per cent of post-tax FFO.
But it also warned that gearing would rise after the company spent $210 million to buy the five-community Living Gems land lease portfolio in Queensland and that defaults on residential settlements – about 6 per cent at the last earnings announcement in August – were above the company’s historical average.
“They’ve probably gone up a bit since then,” one analyst said.
The update by the country’s largest diversified residential developer gives a good insight into the unfolding market as consumers grapple with higher borrowing costs and an increasingly uncertain economic outlook.
Stockland’s net 991 residential sales in the September quarter were up from the June quarter’s 917, the latest in a housing ebb-and-flow that would change little until the outlook for interest rates changed, it said.
The company kept its settlement target of 5200-5600 homes for the year, but said the skew in settlement volumes and funds from operations towards the second half would be greater than it anticipated in August.
A near-doubling of sales of land lease communities homes to 111 from 63 in the same quarter a year earlier showed the strength of demand for the homes that downsizers buy and own on land for which they pay rent and justified the company’s continued expansion into the growing sector.
Stockland said it would triple its number of land lease, or manufactured housing estates, this year from the five operational facilities it had as at end-June. It opened two more in the September quarter and would open a further 10 over the current year, it said.
Stockland was still targeting between 400 and 450 land lease settlements this year, with development profit margin “slightly below” its long-term 22-27 per cent target range due to the costs of ramping up the operation, it said.
The company made no comment on the legal action taken against it by smaller rival Lifestyle Communities in a bid to stop Stockland from using the Victoria-based company’s name as a sales and marketing term.
Lifestyle Communities managing director James Kelly on Monday said he had heard nothing since serving notice on Stockland earlier this month.
“It’s all been deadly quiet on the Western Front,” Mr Kelly said. “We’ve had no approaches from them and no response.”
The company’s town centres portfolio of retail property enjoyed a 7.6 per cent increase in sales from a year earlier, with specialty sales up 5.2 per cent.
Stockland said it would start the “majority” of $1.1 billion worth of logistics developments this year. Its weighted average lease expiry lengthened to 3.7 years from 3.3 years 12 months earlier.
The weighted average lease expiry of the company’s office portfolio stood at 4.7 years, reflecting the fact that the majority of its portfolio was being repositioned.
Stockland shares closed down 5¢, or 1.43 per cent, at $3.79 – twice the overall decline of the 33-member S&P ASX200 A-REIT index.
Separately, ASX-listed Mirvac said it and joint owner Blackstone had exchanged contracts to sell the 39-level office tower at 60 Margaret Street and the commercial MetCentre in the base of the building to Ashe Morgan and MEC Global Partners Asia for $388.6 million, in line with reported June 2023 book value.
Settlement was expected by the end of October, Mirvac said.
