Leighton Properties posts loss but expects outlook to improve with increased migration

Leighton Properties is confident of a rebound in both commercial and residential markets over the next three years following the release of disappointing annual results for the for the financial year to June 2011.

The property development division of Leighton Group recorded a loss of $100 million before tax in the financial year to June 2011 and a loss of $73 million in the previous financial year.

However, Leighton CEO Hamish Tyrwhitt expects an increase in underlying demand for residential property due a rise in net overseas migration.

“One of the key drivers of residential property, net overseas migration, is forecast to accelerate to a peak of 240,000 in 2014 from the current expected trough of 165,000 in 2011, which will lead to a commensurate increase in underlying demand,” he says.

“This factor, combined with new dwelling commencements falling by 6% in 2011, will keep residential market conditions tight in terms of low vacancy rates, rental growth and prices growth. This positive outlook for the residential market underscores the strategic move to increase the company’s stake in Devine Limited and the restructuring of Leighton Properties to focus on this market.”

In its annual report the group reported strong sales for its major residential development project, the Hamilton Harbour Residential Towers on the Brisbane River, with 90% of the 470 apartments comprising towers 1 and 2 sold.

The project – a joint venture with developer Devine - is due to be completed in November 2011 with a third tower, Riverside Hamilton, due to start construction later in 2011. It is currently more than 50% sold.

Leighton Properties has over $1.7 billion worth of commercial and residential projects under development or construction.

Commercial projects that have commenced construction include the 19-storey Eclipse Tower in Parramatta west of Sydney and King George Central, a 27-storey office tower on Anne Street in the Brisbane CBD.

Tyrwhitt says demand in the commercial and industrial markets is also “slowly improving”.

“A real increase of 13% in the value of commercial and industrial building commencements is expected in 2011. The previous activity peak of $24 billion could be reached again in 2014 which should offer a number of construction and development opportunities for the group,” he says.

Overall, the Leighton Group made a loss before tax of $491 million, compared with last year’s profit before tax of $843 million.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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