A run of record low interest rates means the housing market is in for a dream run for some time, property group Mirvac says.
Mirvac and rival Stockland are both predicting strong house-price growth for at least another two years, largely because of low interest rates and an undersupply of homes.
"We believe we are in a longer cycle fuelled by lower for longer interest rates," Mirvac chief executive Susan Lloyd-Hurwitz said.
"The residential market in Sydney particularly has two to five years but we certainly see it as a more moderate cycle rather than a sharp uptick."
She rejected the notion that the market would overheat and said price growth would eventually moderate but it would still be strong. Mirvac's profit rose 13 per cent to $279 million in the six months to December 31, with all four areas of its business (residential, retail, office and industrial) reporting solid growth.
The group has narrowed its full year operating earnings per share guidance in the upper range and is on track to achieving its target of more than 2,200 residential lot settlements.
In the first half, Mirvac secured nine new projects consisting of 3,350 lots, which are expected to generate $1.6 billion in revenue. The majority of Mirvac's projects are apartments in Sydney. About 45 per cent of its buyers are investors, 36 per cent are upgraders, and the rest are first home buyers.
The group has been concentrating its office and retail businesses on the higher growth markets of Sydney and Melbourne. It will also trim its regional shopping centre portfolio; a sector that has been impacted by the mining boom wind-down.
Ms Lloyd-Hurwitz said the Sydney and Melbourne office market was recovering, with vacancy levels expected to tighten.
"Our strong exposure to these markets positions us well for the future, with 82 per cent of our office portfolio located in these core markets."
"We are very defensively positioned with very low weighting to Perth and Brisbane."
She said office vacancy rates were rising and rental income falling in Perth and Brisbane.
MIRVAC IN FOR LONG HOUSING BOOM
- Half year net profit of $279m, up 13.4 pct, from $246.1m
- Revenue of $1.14b, up 17 per cent from $975.2m
- Interim dividend, unfranked, of 4.5 cents, from 4.40 cents.
By Petrina Berry