No property market recovery in 2013, but some early positive signs in WA: Peet

Residential property developer Peet expects “conditions” in the residential property market to remain “volatile and challenging" into 2013 with business and consumer confidence remaining low despite the series of rate cuts in the previous financial year.

However, Peet managing director and CEO Brendan Gore did note in the company’s annual report that “positive signs” have emerged in the Western Australian property market in the first months of the year.

And he said there are also plans to accelerate development of Peet's Vantage master-planned residential community in Gladstone, the mining hotspot 550 kilometres north of Brisbane.

However, the overall tone of the annual report was one of a challenging year ahead for Peet and others operating in the residential development sector.

“The 2012 financial year delivered some of the most challenging conditions experienced in almost 20 years and there is little expectation that markets will improve significantly in the 2013 financial year,” said Gore.

“The series of interest rate cuts in 2012 has not had the desired effect to date and consumer and business confidence remains low."

He did add that the long-term fundamentals of the Australian property market – including population growth, an under-supply of housing and a tight rental market – “remain conducive to an improving market.

“However, the catalyst for household confidence, which will underpin improved demand in the residential property market activity, is yet to be found.”

Gore says Peet would be well prepared to "respond quickly and effectively to any improvement in consumer sentiment and the residential market".

“However, given the ongoing uncertainty in Australia, and until the timing and strength of the expected recovery is confirmed, the directors are unable to provide guidance on 2013 operating earnings with any degree of certainty."

Peet recorded a net operating profit after tax of $20.3 million for the year to June 30 and statutory net profit after tax for the full year of $5.4 million, representing a decrease of 76% compared to the previous corresponding period.

Shareholders did not receive dividend payment.

Peet chairman Tony Lennon said he appreciated this would be disappointing for investors, but said he trusted investors “have confidence in our ongoing dividend payment policy and the validity of the reasoning behind the decision taken”

Lennon said the year ahead would be a period of consolidation for Peet.

“We are operating in exceptional times where, despite the relative wealth of our own nation, we are heavily impacted by the global economy and consumer and business confidence has been low over a sustained period of time.

“This time last year, it was the crisis befalling some European economies and concern about the United States’ debt ceiling issue. This year, the slowing of the Chinese economy and falling commodity prices are also having significant flow-on effects in Australia and consumer and business sentiment remains cautious.

But he said the company was well positioned with “quality assets in good locations around Australia”.

“We have managed through a number of cycles and will continue to maintain the rigour required during the current market conditions, while positioning the company to capitalise on any upturn in consumer sentiment.”

Peet’s biggest residential project is Flagstone City, 45 minutes south-west of Brisbane in Jimboomba, which has a gross development value of $1.87 billion and is due to begin in 2013. It features 1,500 lots and is proceeding as scheduled.

In total Peet has a lot pipeline of 34,600 worth $6.2 billion.