Sydney property activity to drop by 15%: Mirvac

Property prices in Sydney are reaching their peak and sales activity in the city will drop by around 15% over the next year or two, Mirvac Group’s chief executive Susan Lloyd-Hurwitz has forecast.

Lloyd-Hurwitz made the predictions in announcing the group’s 2015 financial results, which included a record $2 billion worth of residential pre-sales, up 67% on the previous fiscal year.

“It does seem that the Sydney market is close to the point at which the strong upwards trajectory will end … We expect price growth to moderate away from the high double digit growth rate that it has been experiencing,” Lloyd-Hurwitz said.

Strong underlying demand for homes in Sydney was expected to prevent price falls. 

Lloyd-Hurwitz said the mix of buyers would more likely shift in favour of owner occupiers, away from investors who have recently been dominating the market.

Investors now account for about 40% of Mirvac’s residential sales, while owner occupiers and first home buyers made up 30% each. In the 2014 financial year, only 20% of the group’s sales were to first home buyers.

The group – which owns retail, office and industrial assets in addition to its residential development business – reported a statutory profit after tax of $609.9 million, up 36%.

Its financial results were at the top end of its guidance range, with an after-tax operating profit of $454.8 million, representing 12.3 cents per stapled security. It paid out distributions of 9.4 cents per stapled security.

Mirvac is in discussions to buy the $9 billion Investa office operation from Morgan Stanley Real Estate Investing. Lloyd-Hurwitz could not comment further on the deal aside from to say it was “a highly strategic opportunity” that was “uncertain and incomplete”.

The group forecast earnings per share for fiscal 2016 would be between 12.7 and 13 cents per stapled security and distributions would be from 9.7 to 9.9 cents per stapled security.

What Mirvac Group chief executive Susan Lloyd-Hurwitz said about other markets around the country:

• “Conditions in the residential market are quite variable across the country.”
• “In Melbourne, strong population growth will continue to support the demand with the deepest demand in the middle and outer rings.”
• “In Brisbane, demand is steady with relatively attractive investment yields which is seeing Sydney-based investors investing into Brisbane. There hasn’t been a lot of supply in the land business so we’re seeing moderate price growth there.”
• “In Perth, subdued economic conditions are certainly impacting the market. The affordable end of the market is supported by policy incentives.”