Home buyer slump puts pressure on Stockland
In a quarterly update on Wednesday, it reported a sharp slump in land sales in late March and April that is likely to weigh on earnings, with sales contracting to 137 lots in April. By the end of the quarter it had settled 3034 lots, 59 per cent below its pre-virus guidance of 5200 lots for the financial year.
However, despite the turmoil and uncertainty caused by the COVID-19 outbreak, it said settlement rates for land lots on its estates are stable and buyer defaults are relatively low, at about 4 per cent.
The $6.5 billion ASX-listed property manager owns and develops popular housing estates such as The Gables in Sydney’s north-west and Cloverton in Kalkallo on Melbourne’s northern fringe.
Stockland warned, however, while new buyer inquiry has recovered to pre-COVID levels, it was still too early to identify clear trends. “We remain cautious about the shape and speed of recovery of the market,” Mr Steinert said.
The group is hoping inquiries will translate into sales. “Even this last weekend, we had very strong outcomes in Melbourne. That’s suggesting there is a degree of pent-up demand and also a reduction in supply,” he said.
Analysts at Macquarie Group added further clouds to the group’s horizon, forecasting buyer defaults will shift upwards to 10 per cent in the second half of this year. “While we are constructive on the medium-term outlook for residential markets (and buoyed by the increase in inquiries over recent weeks), we believe the short term will be characterised by lower sales and elevated defaults or delays,” they said.
Like many of its real estate trust peers, Stockland owns and manages multiple shopping centres clustered in housing estates it has developed. Mr Steinert said those malls experienced the greatest impact from the pandemic, with significant falls in foot traffic, non-essential store closures and sharp sales declines in specialty stores. About 60 per cent (by income) of its malls stayed open and, as of this week, 75 per cent by income had reopened.
“As the new normal comes through, people can come back to work quite quickly and you can see that in our shopping centre portfolio,” he said.
Trading conditions for non-essential goods and services are expected to remain challenging.
In response to the uncertainty, the group withdrew its future earnings guidance in March and has put a freeze on employee remuneration, training and recruitment.
The board and executive team also took a 20 per cent cut in fees and fixed salaries for a two-month period starting in May.
Stockland’s retirement living business is also being impacted.
Sales volumes of units in retirement villages are slowing and customers are taking longer to sell their existing homes, limiting their ability to move into retirement.
Its office and logistics properties are less affected by the uncertainty.
Mr Steinert said he was not in a position to give further guidance, but added: “when you’re talking about going into 2020-21, it’s logical that you would see a reduction in sales which would result in a reduction in profit.”
Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.