Property giant Lendlease is seeing longer settlement periods and higher cash buying as apartment buyers respond to a recent clampdown on mortgage lending by banks.
The company said residential pre-sales remained steady but customers are taking longer – between 28 to 30 days – to complete settlements at Australian apartment buildings.
“In Australia, we are working with buyers who need more time for settlement. We are also seeing increased use of non-banking sources of finance and also more cash buying,” chief financial officer Tarun Gupta said.
Australia’s major banks have tightened lending criteria for property investors over the past year – particularly for foreign investors, in response to the regulator’s cap on lending growth in the investor market.
“We are seeing seeing an uptick in cash settlements, which are now 30 to 35 per cent. We are also seeing more non-banking finance entities writing loans for our customers,” Mr Gupta said.
Lendlease booked residential pre-sales of $5.7 billion, with 2,037 units settled, including 628 apartments.
Apartment defaults continued to be minimal, at less than one per cent.
The company delivered a 12 per cent lift in first-half profit, leveraging on its strength in the construction and office building space.
It reported net profit of $394.8 million for the six months to December 31, as margins jumped at its US construction business and sales were stronger at a number of its Australian office buildings.
Revenue rose 7.6 per cent to $7.95 billion.
Lendlease lifted earnings for the development division by 10 per cent, in part because of the completion of the last of the three Barangaroo office towers in Sydney.
“Commercial development, in particular the Australian office sector, was a highlight of the first half result,” chief executive Steve McCann said over an investor call.
The company made forward sales for three office buildings in Brisbane and Melbourne, and sold down a majority stake in the Circular Quay Tower development in Sydney.
The office segment is expected to be a major contributor to future growth at the company, with 13 major commercial buildings now in delivery phase across the globe, with estimated value of $7 billion.
Total development pipeline grew to $49 billion, up five per cent from a year earlier.
“We remain well placed for future success given earnings visibility and a targeted and disciplined approach to delivering on our strategy,” Mr McCann said.
But the main contributor to profits was the construction division, where half year earnings jumped 45 per cent, mostly on the back of a rebound in margins at the American business as a number of projects were completed.
Construction margins were weaker in Australia, but were offset by increased engineering activity.
The company declared an unfranked interim distribution of 33 cents per security, up 3.0 cents from a year earlier.
LENDLEASE LIFTS HALF-YEAR PROFIT
* Net profit $394.8m, up 11.6pct
* Revenue $7.95b, up 7.6pct
* Interim dividend up three cents to 33 cents, unfranked.