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Australian property sector crawls along in residential development

Souce:Xinhua Publish By Updated 15/02/2013 7:44 am in World / no comments

 

by Samuel Poon

CANBERRA, Feb. 14 — The largest-listed residential developer in Australia, Stockland Property Group, has announced a first half year statutory loss of 147 million Australian dollars ( 151.4 million U.S dollars) on the back of impairments in its residential book, becoming the latest listed property trust to suffer the ill-effects of Australia’s problematic housing market.

This is a staggering number that says a lot about the lackluster status of the residential development market in Australia since the global financial crisis.

The developer’s new chief executive since mid-January, Mark Steinert, described the result as “disappointing” but said it ” reflected the difficult operating conditions.”

Stockland’s rival Mirvac Property Group, last week made a provision of 273 million (281 million) against its residential inventory, taking total impairments to one billion (1.03 billion) since 2008. Unfortunately for shareholders, Mirvac only earned about 514 million (529 million) before interest and tax over the same period that it took the one billion in cash hits.

Meanwhile, the stagnant housing finance figures released earlier this week also raise questions about the quality of recovery in the home market. First home buyers appear to be on strike.

Westpac Banking Corp says finance approvals for first home buyers were down 24 percentage points in the last three months of 2012 to 14.9 percent, the proportion of owner-occupied loans for first home buyers was the weakest reading since 2004.

“During the financial crisis period, Australia federal and state governments’ first-home buyers grants were benefits to first home buyers, but the grants was reducing step by step,” Harley Dale, Housing Industry Association chief economist, said.

Dale has also called for a major overhaul to property taxes to alleviate price pressures on new homes.

“In an ideal world, we need to see a fairer taxation system where there’s not as much inefficient cost embedded in the price of housing that is an unnecessary hurdle for first time buyers to try and have to jump over,” Dale says.

“Stamp duty is the one that gets the biggest focus because there is a raft of taxes that apply to new housing in Australia, for example, you pay GST (goods and services tax) on new housing but you don’t pay GST on existing property.”

Over at Stockland, Steinert’s predecessor, former chief executive Matthew Quinn told the annual meeting last year that Australia had the worst new housing market in 20 years.

Quinn said that the Reserve Bank of Australia had a lot more work to do in terms of interest rate cutting before new home buyers would return in force.

Whereas, Steinert struck an optimistic note insisting today’s tough medicine sets Stockland up for future growth. “We’ve made some difficult decisions that will help strengthen the business for more stable long-term returns.”

Steinert vowed to sell the 13 residential projects that suffered impairments, arguing this is the right thing to do to ensure its capital is put to best use, given expected returns and the additional 500 million (515 million) of expenditure required over a number of years to trade them out.

CLSA analyst John Kim is bearish on the entire sector and said it will not recover until 2015 or 2016.

 

 
 
 
 
 

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