Reporting season may hold key residential market indicators for investors

Reporting season may hold key residential market indicators for investors
Reporting season may hold key residential market indicators for investors

Investors will be looking to listed property companies’ results and outlook statements for indications of whether the market for residential real estate has deteriorated in light of weakening consumer confidence.

Dalton Nicol Reid portfolio manager Scott Bender said investors were expecting the residential property sector to continue to be reasonably buoyant, but not as strong as in the first quarter of 2014.

“The market is going to be focused on the commentary on the outlook. Contracts on hand will be strong but we’re interested in enquiry and conversion rates and whether they have seen an impact from the softer consumer,” Bender told Property Observer.

“Residential will still be quite strong but there will be a focus on whether [property companies] see softening in those leading indicators following the federal budget.”

Stockland Property Group, which reports to the market on 18 August, will be one to watch given the size of its residential book, said Bender, who manages Dalton Nicol Reid’s property trust portfolio.

Mirvac Group’s results would give an indication of the outlook for medium density residential developments, particularly given the group’s exposure to the NSW market. Bender said NSW property had been selling well for Mirvac and he expected that trend to continue. Mirvac reports on 21 August.

Bender expects further merger and acquisition activity in the coming months as companies are able to access low cost debt and equity and it is becoming more difficult to increase revenue.

“Given there’s cheap equity and cheap debt [merger and acquisition activity] is going to be on the radar but whether companies are going to get something cheap enough to make the numbers work will be the tricky part,” he said.

Land developer Australand is the target of a takeover bid by Singapore-based Frasers Centrepoint. Australand’s directors have recommended shareholders accept Frasers’ off-market takeover bid of $4.48 cash per Australand security. Earlier in the year, Stockland made an unsuccessful play for the group.

Australand reported on 21 July that it had made a $131.5 million net profit after tax for the half year results to 30 June, up 49% on the prior corresponding period.

It reiterated earlier guidance that earnings for the full 2014 year were likely to be up 20-25% on 2013, and earnings per share would grow by 10-15% from 2014 to 2016, assuming the residential market remained strong. However, the company noted that Frasers would review its structure and operations if the takeover proceeded, so guidance may change. 

Zoe Fielding

Zoe Fielding

I am a freelance journalist and editor with more than 15 years experience specialising in personal finance, property, financial services and financial technology. A skilled writer and researcher, I have extensive experience producing high quality content for corporate and media clients. I am used to working to tight deadlines and tailoring the pieces I produce to suit a variety of audiences and formats.

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