Softening conditions in residential land sales are providing a mixed bag for the industry, with some of Western Australia’s biggest players bolstering earnings via increased exposure in other markets, while others are holding course and pushing on in Perth.
Softening conditions in residential land sales are providing a mixed bag for the industry, with some of Western Australia’s biggest players bolstering earnings via increased exposure in other markets, while others are holding course and pushing on in Perth.
ASX-listed developer Peet listed uncertain conditions in WA’s resources sector, and the associated reduction in demand for land as population growth slows, as a key challenge for the 2016 financial year, when lodging its full-year results with the ASX last week.
However, Peet managing director Brendan Gore said the group’s diversity of operations across capital cities held it in good stead, and was the main driving force behind a 22 per lift in revenue and a 27 per cent rise in net profit, to $38.5 million.
Mr Gore said there was a marked shift of the group’s earnings to the east coast, a trend expected to continue over the next 12 months.
WA’s only other listed land developer, Cedar Woods Properties, also booked a rise in net profit, albeit at a more modest 4.6 per cent, to $42.6 million.
Cedar Woods’ profit was underpinned by solid performances in Victoria and WA, while the $36 million sale of a Masters Home Improvement store in Victoria offset a 17 per cent reduction in revenue.
Managing director Paul Sadleir said Cedar Woods had benefited from having a portfolio spread across a number of locations.
Earlier this month, the state’s largest developer, Satterley Property Group, bolstered its Victorian land bank, buying a 1,350-lot estate from Peet for $93.1 million.
The purchase, according to managing director Nigel Satterley, was a concerted effort to refresh the group’s Victorian development pipeline.
Satterley Property Group has been focused on increasing its exposure to Victoria for the past two years, lifting its market share from 3 per cent, to more than 10 per cent.
But for another private developer, PRM Property Group, Perth’s slowing market is providing fresh opportunity as it comes to a close at its Piara Waters land estate and moves towards completion at its largest estate, the 3,300-lot Banksia Grove.
PRM chief executive Brendan Acott told Business News he saw significant prospects for the developer to grow its business off the back of its portfolio of work, notwithstanding current market conditions.
“We’ve got cash and it’s at a time where the market is softening,” he said.
“We don’t have huge exposure out there, so that’s an opportunity for us to capitalise and refill the future supply of land from PRM over the next 12 months.”
Mr Acott said he expected price pressures on large-scale development plots in Perth would emerge over the next six to 12 months, as sales returned to levels around long-term averages.
“That’s the opportunity to generate stock, we think it’s always a good time to buy when there is a dip,” he said.
Mr Acott said PRM would focus on joint-venture opportunities, both with government agencies and landowners, as well as direct purchases of parcels of land to grow its business.
While he didn’t expect PRM to compete directly on the urban fringe growth corridors with developers Peet and Cedar Woods, or big national groups such as Stockland or Australand, it would seek instead to leverage opportunity in reasonably established markets where there remained good demand for land.
“If you have a look at the sub-regional frameworks, what you can see are quite reasonable areas that are forecast to open up for urban development in the future, but they are quite fragmented,” Mr Acott said.
“That’s going to be an interesting challenge for the industry, but it’s a great opportunity for PRM to use its skills with communities and people to create an opportunity.”