Stockland Corporation Ltd (ASX: SGP) reported its 2014 first-half results, showing a confident 9% growth in NPAT before abnormals. Statutory profits came to $298 million, with statutory earnings per share of 12.9 cents. The growing housing market can be seen as property buyers are drawn to new home construction. Established homes are also rising in price like in the hot Sydney market.
Total number of lots settled were 8.1% higher at 2,253, and residential lot segment operating profit was $39 million, up 39.3% from the previous corresponding period. The focus was on affordability and it saw strong first home buyer sales.
NSW had the best improvement in settlement volumes, up 48% in a strong market. WA was next at 32% and a 22% increase in Queensland numbers was promising, but it was coming off a low base. Lastly, Victoria was up 9%, experiencing limited price growth.
For its commercial property segment, underlying profit for its retail property rose 9% to $174 million, whereas industrial and office was down 3% and 12% respectively. In total, this segment achieved a 4% gain to $249 million in underlying profit compared to the pcp.
The company commented about market trends for each of its asset classes, stating that in residential the improving market is broadening geographically. In a previous article I wrote about housing financing rising for investment properties and new construction, and how property investors are expanding out to the Queensland market looking for better yields after prices in Sydney rose so sharply.
NSW has pent up demand and the historic undersupply should support the Sydney market.
The company notes it is only expecting modest improvement in the sales environment in retail property, but there was a positive wealth effect from the residential market in play. Lower rates will fuel this, but with unemployment creeping up, the improvements may be measured.
Market conditions for office property remain difficult and demand for industrial property is dependent on location, so it’s not in full swing.
Retirement living, similar to residential, showed improvement with a $17 million operating profit, up 41.7%, partly due to a 21% increase in established unit turnover.
Other housing construction and property development companies like Mirvac Group (ASX: MGR), Australand Property Group (ASX: ALZ), Peet Limited (ASX: PPC) and Villa World (ASX: VLW) are experiencing stronger residential sales so a definite trend can be seen.
Being towards the beginning of an uptrend in housing, investors should be looking into builders and building materials companies to take advantage of the recovery.