Stockland reports weak residential sales
Stockland’s third quarter market update highlighted that property group results remain on track for FY19 in what its CEO Mark Steinert said was "a challenging trading environment."
Residential sales for the quarter were 26 per cent below the second quarter and expected to remain weak for calendar year 2019, "with risk to the downside given current challenging market conditions, reduced credit availability and buyer uncertainty due to the upcoming Federal election.
“We remain on track to complete over 6,000 residential settlements over the full year, with the anticipated settlement skew to the second half, and an operating profit margin over 18 per cent.
"Cancellation rates have increased moderately on the back of uncertainty created by current market conditions, however default rates have remained stable at around 3 per cent.
“We continue to see demand for our product from our core market of first home buyers and owner-occupiers which make up 50 per cent and 84 per cent of our customer base respectively, as we focus on providing affordable, liveable and sustainable homes in communities connected to infrastructure and jobs.
“Across the country we have reasonable visibility of earnings over the medium term, with over 2,800 contracts on hand for settlement from FY20, but we expect challenging conditions to continue throughout 2019.”
“We’ve achieved residential settlements and net deposits broadly in line with expectations this quarter, solid retail sales and strong leasing and development activity in our workplace and logistics portfolio.
"This is being countered by weak residential sales and negative retail rent reversions."
It achieved a cumulative $284.5 million of non-core retail town centre divestments, including the recent sale of Stockland Kensington in Queensland.
“We are actively progressing capital partnering opportunities across all sectors represented in our business, through ongoing engagement with a range of potential domestic and international partners," Steinert noted.
Steinert said Stockland have a strong focus on building resilience of income across its national commercial property portfolio.
"We’ve taken a clear view of core and non-core assets, defining our core assets as leading town centres with strong and growing trade areas with limited competition, and where we have the opportunity to enhance the asset to generate sustainable income growth over time.
“We’ve seen continued solid sales results across our retail town centres, reflecting the success of our remixing strategy and focus on health, services, lifestyle and entertainment to drive foot traffic. Comparable speciality sales are up 3.8 per cent for the year to 31 March 2019 at $9,253 per square metre.
“As flagged at the half, while we continue to experience negative retail income growth, we have a clear focus on stabilising income.
"We are also rolling out a place making strategy across our portfolio to add value to our community offering and drive more foot traffic into our centres.
During the quarter, it commenced construction of the new $33 million Baringa Town Centre at the Aura community on the Sunshine Coast,