Mirvac expects slowing in price growth

Zoe FieldingFebruary 15, 20150 min read

Prices for residential property in Australia’s major capitals will continue to rise but at a slower pace than in previous years and there will be variation across different parts of the cities, the head of Mirvac has forecast.

Demand for housing is outstripping supply in many locations, while low interest rates are continuing to support residential markets and housing finance is up in all major states, Mirvac chief executive Susan Lloyd-Hurwitz said at the company’s half-year results briefing.

“We expect housing credit to continue to grow,” Lloyd-Hurwitz said.

The value of dwelling finance commitments excluding alterations and additions rose 4.7% from November 2014 to December in seasonally adjusted terms, the latest Australian Bureau of Statistics (ABS) data shows.

Building approvals increased by 8.8% in seasonally adjusted terms in the December quarter of 2014 compared with the same quarter of 2013, according to ABS figures.

“Sydney in particular is supported by entrenched undersupply,” Lloyd-Hurwitz said. “Over the next 20 years an additional 1.6 million people will live in Sydney and to accommodate that population growth the market needs to supply over 33,000 new dwellings per annum and that’s a level [of construction] that has never before been sustained.”

All major states had experienced strong population growth, although this has slowed in Queensland and Western Australia.

Demand for housing coupled with limited supply is expected to drive property prices higher.

Mirvac expects modern, higher density dwellings with access to infrastructure and amenities to be most in demand, particularly in the south eastern states. The company secured nine new residential projects in the first half of the 2015 financial year with most of the lots in NSW.

Overall, the company’s residential portfolio is dominated by properties in Sydney and Melbourne, with more than half apartments.

“While overall vacancy rates are low across all capital cities there are pockets of oversupply which requires us to be very disciplined about which submarkets we pursue,” Lloyd-Hurwitz added.

Mirvac has walked away from residential development opportunities when the risks were too high or the rewards too low, she said.

The company reported a $279 million profit attributable to security holders for the first half of the 2015 financial year, up 13.4% compared with the previous first half. Operating profit after tax increased to $231.2 million, up 15.5% compared with the half to December 2013.

It has forecast full year earnings per security will be between 12.2 and 12.3 cents, and distributions will be 9.2 to 9.4 cents per security.

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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