Mirvac, the country’s biggest apartment developer, has signalled the bottom of the housing market, saying there has been an upturn in the level of residential inquiries across its Sydney and Melbourne developments.
Mirvac chief executive Susan Lloyd-Hurwitz yesterday said, in the group’s September quarterly update, the group expects to see the rise in enquiries translate to sales volumes “in due course”.
Mirvac also remained committed to push for higher building standards in the construction sector, in the wake of high-profile evacuations of poorly built apartment towers.
We are actively engaging with government and other stakeholders to drive change across our industry.
Ms Lloyd-Hurwitz yesterday said as the apartment market continues to face scrutiny, and building standards are called into question, “we are actively engaging with government and other stakeholders to drive change across our industry”.
“Having set the standard in quality for almost 50 years, we are committed to going above and beyond regulatory requirements and paying attention to every detail in order to continue to deliver vibrant new communities that leave a lasting legacy for future generations,” Ms Lloyd-Hurwitz said in the update.
But the improving conditions have not flowed through to off-the-plan sales, which remain impacted by consumers’ fears of potential issues with the construction of apartment blocks.
This is leading to a “flight to quality” to well-known brands, according to Mirvac and its competitor Stockland, which focuses on home and land developments.
Stockland’s chief executive Mark Steinert said, after the group’s annual general meeting on Monday, that high profile building failures and issues, “particularly in Sydney, [had been] definitely affecting building commencements”.
“What that means is customers are really going to gravitate to brands they know and trust,” Mr Steinert said.
For the quarter ending September, Mirvac settled 613 residential lots and is on track to achieve more than 2500 settlements for the 2020 financial year. This will be boosted by St Leonards Square on Sydney’s lower north shore, a 36-storey tower where 99 per cent of the 527 apartments are now sold.
Macquarie Equities’ analysts said for the September quarter, defaults remain below 2 per cent, adding the improving residential backdrop is “supportive and we retain an outperform” recommendation.
Mirvac’s industrial and office sectors performed strongly thanks to low vacancy levels and sustained demand for high-quality space in the Sydney and Melbourne CBDs and fringe locations, where 85 per cent of the portfolio is located.
Mirvac has a $3.1 billion development pipeline which includes the Olderfleet, 477 Collins Street, Melbourne. The 38-level building is now 94 per cent pre-committed to a range of tenants with Deloitte as the anchor.
In Sydney, demolition works are almost complete at the Locomotive Workshops at South Eveleigh.
Macquarie Equities analyst said they expect that the group will look to sell a 50 per cent interest in the project, which is consistent with Mirvac’s strategy in office developments.
Ms Lloyd-Hurwitz said the retail business was focussed on offering “experiences” in its malls. The sales growth moderated slightly to 2.6 per cent, driven by a dip in supermarket sales, mobile phone sales and discretionary jewellery sales.
Mirvac shares were unchanged at $3.17.
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