Residential property developer AVJennings Ltd's (ASX: AVJ) share price fell 3.54% today after posting an egregious set of interim results. Compared to the previous corresponding period, the company saw its revenue decline 39% and net profit after tax shrink 91%.
The market had been expecting a negative result given the weakness in Australia's housing market and prior warning that fiscal year 2019 earnings would be skewed towards the second half. The company's share price has been on a steady decline over the past six months.
AVJennings noted that consumer confidence has suffered in the face of political uncertainty, 'sensationalist' media commentary regarding Australia's housing market and a credit squeeze by the banks.
Managing Director and CEO, Peter Summers pointed to the Banking Royal Commission as having played a role in the tightening of lending conditions. Last Friday, the Reserve Bank of Australia denied that tougher lending policies were responsible for a credit crunch that was fueling the decline in house prices.
The company is optimistic, however, that currently, soft market conditions aren't here to stay, pointing to positive economic conditions, solid market fundamentals and the reduced likelihood of a rate hike in 2019. Additionally, the company predicts that stronger wage growth and inflation, positive net migration into capital cities and improving affordability will be tailwinds for housing demand.
The statement also mentioned loosening of lending conditions as a potential upside: "Importantly, the banking regulator APRA has acknowledged that some of the curbs imposed upon bank lending over the past few years have done their job and must be reconsidered to avoid unintended consequences, particularly as new construction activity diminishes, and developers pare back supply."
Today's declines saw the AVJennings share price down almost 25% over the last 12 months.
