Big property players deliver financial results
The big players in the property sector started delivering their results to the market last week, with the themes of rising valuations for prime property, tightening capitalisation rates and strengthening markets in Sydney and Melbourne offset by slower conditions in Perth and Brisbane.
The residential market was in the spotlight with diversified property company, Mirvac Group, reporting an operating profit of $454.8 million, up 4%, and a record $2 billion in pre-sales from its residential division.
The group, which has a significant residential development business focused largely on the apartment market, said it had already secured 67% of its expected 2016 development earnings before interest and tax and 57% of its 2017 budget amid strong demand.
However, chief executive Susan Lloyd Hurwitz said conditions in the buoyant Sydney market were reaching their peak and conditions were mixed across the country. She warned government measures to slow investor spending on property could have a detrimental effect on the housing market.
Industrial property specialist, Goodman Group reported it had benefited from strong residential markets by selling $1.1 billion worth of non-core industrial land to residential developers for urban renewal projects.
Chief executive Greg Goodman said the group held land across Sydney that was in high demand for rezoning for residential uses. He expected urban renewal activities to become a significant source of capital for the group to invest in industrial developments and selective acquisitions.
Goodman Group reported a full-year operating profit of $653 million, up 9% on the 2014 financial year.
“This equates to over 7% growth in earnings per security, largely driven by growing development volumes, which has seen our work book increase to over $3 billion, and robust activity across our stabilised portfolio, with net property income growth of 2.5% and occupancy maintained at 96%,” Goodman said in a statement to the Australian Securities Exchange.
The group, which owns and develops industrial and logistics properties in several countries, forecast operating earnings per security would increase in fiscal 2016 by 6% to 39.4 cents. It forecast it would pay out distributions of 23.8 cents per security.
Dexus Property Group agreed the outlook for industrial property was solid. It reported one-year returns of 11.3% in its industrial portfolio, up from 9% in 2014, although it noted that performance across sub-sectors was varied.
Dexus, which is concentrates on the prime office property market, reported an increase of 9.3% in Funds from Operations on a per security basis in 2015 compared with the 2014 financial year.
The group was upbeat about the outlook for the Brisbane office market, and reported Sydney and Melbourne’s markets had come back into balance.
Vacancy levels in Sydney were expected to rise in 2016 to peak around 9.7% as new supply at Barangaroo came to market, but then fall sharply in 2017 and 2018 to around 6.5% due to a lack of new supply, significant withdrawals, and continuing improvement in demand.