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Property developer Mirvac expects a strong year despite ongoing settlement delays from foreign buyers and the rate of defaults edging higher.

Chief executive Susan Lloyd-Hurwitz said default rates for the first three months of the 2017 financial year were slightly above the group’s historic average of one per cent.

She said the group has resold all defaulted lots and remains on track to achieve a significant uplift in earnings in residential business.

“While we continue to experience settlement delays from foreign buyers, settlements overall are tracking in line with expectations,” she said in a update on Mirvac’s first quarter operations on Tuesday.

“And, we continue to carefully monitor and manage our settlement risk profile.”

Foreign buyers made up 27 per cent of Mirvac’s pre-sales, including 21 per cent from mainland China, during 2015/16. Settlement defaults were less than one per cent in FY16.

The Reserve Bank warned earlier this month about the risk of foreign buyers walking away from their off-the-plan apartment purchases amid tighter lending conditions to offshore buyers and a fall in property values from the day it was bought off-the-plan to settlement day.

Mirvac settled more than 660 residential lots in the first three months of the new financial year, in line with company expectations and is on track to settle more than 3,300 lots for the full-year.

The majority of its targeted settlements is expected to happen in the second half of the year.

Mr Lloyd-Hurwitz said the group had achieved a record number of residential lot settlements in 2015/16, and was aiming for more than 15 per cent growth in fiscal 2017.

“We have made a solid start to what we are expecting to be a very strong year for Mirvac, with metrics in the investment portfolio remaining high and steady progress made in completing settlements within our residential business,” she said.

Ms Lloyd-Hurwitz said the group had more exposure to Sydney and Melbourne than other markets and its mixture of master-planned communities and apartment projects meant it was well placed to capture demand.

Solid sales momentum is expected to continue as the group launches new projects and releases more stages of existing projects, including Sydney Olympic Park and Marrickville in Sydney.

The group’s property investments were also tracking well with high occupancy and long-weighted average lease expiries across its retail, office and industrial portfolio, the company said.

Its retail properties maintained 99.8 per cent occupancy in the first quarter thanks to high levels of consumer spending in NSW, an uplift in housing construction across Australia’s major eastern urban cities and increasing employment in the service sector.

Ms Lloyd-Hurwitz said the group was on track to achieve its target of operating earnings growth of between eight and 11 per cent in 2016/17.

 
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