Mirvac most at OTP apartment settlement risk among listed property developer company
UBS says Mirvac, Lendlease and Stockland now face a higher risk of settlements falling over because of their exposure to projects sold to buyers at the 2017 peak of the property cycle.
“We see Mirvac as most at risk followed by Lendlease and Stockland,” analysts Grant McCasker and James Druce said.
Australia’s largest property players face a risk of buyers failing to pay at settlement time because of falling apartment prices and valuations, analysts say.
In a gloomy outlook for three of the nation's largest real estate developers, UBS said apartment sales make up a significant chunk of earnings for Mirvac, in particular, over the next three financial years.
The most at risk projects are in Sydney’s Marrickville and Olympic Park which “appear already out of the money” because Sydney’s apartment price index has fallen five per cent since launch, the analysts said.
St Leonards could also become an issue were prices to fall a further five to 10 per cent.
The UBS report has surprised industry veterans given Mirvac's history of reliable buyers, often repeat buyers too.
“We are less concerned about Lendlease's settlement risk given the price growth since the 2015-16 launch dates,” the report said.
The number of buyers cancelling contracts on land purchases is presently low, but UBS warns that tightening credit, price falls, incentives and lower deposits will increase the number of buyer who will struggle.
“We expect Stockland's second half settlements to disappoint as cancellation rates increase and settlement times extend,” UBS said.
Mirvac, Stockland and Lendlease reputedly declined to comment to Nine Entertainment on the UBS report, saying they are in the ''blackout'' phase before the release of their interim reports for the December half, due in the coming weeks.
But Stuart Penklis, head of residential at Mirvac advised The Australian that Mirvac was monitoring the changing residential market conditions closely.
"It is important to remember that ‘average’ price changes mask significant differentiation between submarkets and housing type.
"We believe that our disciplined approach to restocking, our commitment to design excellence, a quality product, and customer care will continue to differentiate us from others in the market,” he said.