Housing market recovery tied to interest rate outlook
Australia’s biggest home builder is warning that a housing market recovery depends on lower interest rates.
A housing market recovery depends on lower interest rates, Australia’s biggest home builder is warning.
Stockland chief executive Tarun Gupta made the declaration as the country’s largest listed residential developer posted stronger-than-expected settlement figures.
“The outlook for interest rates will be the critical factor in the recovery of housing sales volumes,” he said.
“We’re positioned to deliver increased settlement volumes over the medium term, but much depends on how interest rates evolve.”
Stockland settled 5,637 lots over the year, beating forecasts following a final-quarter surge in business.
Buoyant WA, Queensland, and New South Wales offset Victoria’s struggles, where cancellations hit 20%, well above the national average of 15%.
“While we saw solid performance across most states, Victoria remains a concern, and the pace of recovery there will also depend on rates stabilizing.”
The company expects between 5,300 to 5,700 settlements for FY25, raising its guidance from April.
But development profit margins are predicted to shrink to the “low 20 per cent range” from the 23 per cent achieved in FY24.
Stockland’s total revenue dipped 6.1% to $3 billion.
Net profit after tax dropped 30.5% to $305 million, impacted by $310 million in property devaluations.
Looking ahead, Stockland emphasized that ongoing strong demand, driven by high migration and employment levels, is being hampered by chronic housing undersupply and affordability issues.
To navigate these challenges, the company has pivoted to more affordable housing options, such as land lease estates, and re-entered the apartment sector with a major high-rise project in Sydney’s Waterloo.
CEO Development Andrew Whitson added: “The residential market has shown signs of recovery over 2H24.
“However, further improvements in conversion rates and sales volumes will depend on the interest rate environment, and the pace of market recovery in Victoria, which has underperformed the other Eastern Seaboard markets to date.”
“We remain confident in the fundamentals of the residential market as net overseas migration and the labour market remain strong amid a chronic undersupply of new housing product.
“We’re focused on increasing production to expand the supply of housing, including more affordably priced product.”
