Stockland has delivered a solid rise in first half profit thanks to Sydney and Melbourne’s property boom, but says prices have cooled.
Stockland’s underlying profit, the property developer’s preferred measure, rose 8.1 per cent to $313 million aided by a 45.5 per cent leap in operating profits from its residential division.
Net profit jumped 50.6 per cent to $696 million in the six months to December 31.
Managing director Mark Steinert says the property giant ended the half with a record number of residential contracts after capitalising on favourable market conditions in Sydney and Melbourne.
But he said demand has softened in Australia’s two largest cities, particularly on the margins.
“We’ve had very strong double-digit price increases and it is reasonable that it pulls back somewhat,” he said.
The weight of supply on the Sydney market has slowed the annual property price growth rate to 10.5 per cent, from 18.4 per cent six months ago, last week’s CoreLogic RP Data report showed.
In fact, all of the latest annual price rise in Sydney was racked up in the first half of the calendar year – in the six months from July 2015 to January 2016, prices actually fell marginally.
In the first week of February, Melbourne was still leading with an annual price rise of 11.0 per cent, while Sydney slowed further, to 10.2 per cent.
Mr Steinert said while there was uncertainty about the economic outlook, low interest rates would help support the property sector.
“On the eastern seaboard we see below trend (growth), but we see good growth,” he said.
Residential chief executive Andrew Whitson said the the market was expected to remain solid in Sydney, Melbourne and south east Queensland during the second half of the financial year.
The strength in those markets would help offset weakness in Perth, he said.
Stockland says it’s on track to achieve its forecast of 6.5-7.5 per cent EPS growth for the full year and is targeting a distribution of 24.5 cents per security.