Land developers call bottom of the property market

In the past 7 days of results season for major ASX listed developers, there has been a mix of commentary in terms of the 12 month outlook - however the consistent theme across each of them is that the market has bottomed out and is back in an upward cycle.  Where there is disagreement is just how fast that ‘recovery’ might be.

AV Jennings, Villa Word and Lend Lease all called the bottom after seeing their sales slump in the last 12 months, yet each of them are bullish about the 12 months ahead – meanwhile, Australia’s largest listed developer Stockland were less optimistic on the speed of the recovery and cautious on their 12 month forward forecast.

“General market sentiment is clearly beginning to improve ... a modest uptick in visitor numbers to sales offices and online is evident and is expected to be sustained during FY20,” AV Jennings said.

Villa World chief executive Craig Treasure said soft consumer sentiment, tight credit conditions and the uncertainty caused by the federal election had created “difficult headwinds".

“We are seeing that sales enquiries have started to improve across Villa World’s projects, however buyers remain cautious,” he said.

Stockland said housing market conditions varied across the country and customers still faced difficulties accessing credit. 

“We’re clear that the market has been to the bottom and is gradually improving, but we continue to see challenges around loan availability and you can see that in the elevated cancellation rates. In that context, we are unsure as to the pace of the recovery.” Stockland CEO, Mark Steinert said.

Throughout FY 2018/19, CFMG Capital faced different challenges for a period – with civil construction struggling to keep pace with sales.  The benefits of taking on smaller projects in targeted areas have allowed CFMG Capital to stay ahead of the cycle, with the ‘downturn’ largely occurring in Sydney and also Melbourne, where CFMG Capital were only operating one project that was already over 85% pre-sold.  Meanwhile, in South East Queensland – sales have tracked along nicely at the budgeted rate, and while there has been limited to no revenue growth during that time, projects were being delivered on time and on budget. The agility of being a smaller operator with projects ranging in size from 20 to 300 lots has allowed CFMG Capital the ability to largely avoid counter cyclical sales and negative revenue growth.

Regardless, there is strong agreement that there will be further growth in activity and revenue in the coming 12 months and CFMG Capital are well positioned to take advantage of these favourable conditions.

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