14/11/2008 - 12:01

Property has bottomed: Mirvac, UDIA

14/11/2008 - 12:01

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Despite record low land sales, prices have steadied and there are early signs of a recovery in the residential property market, property developer Mirvac and the Urban Development Institute of Australia said today.

Property has bottomed: Mirvac, UDIA

Despite record low land sales, prices have steadied and there are early signs of a recovery in the residential property market, property developer Mirvac and the Urban Development Institute of Australia said today.

UDIA chief executive Debra Goostrey said she is confident that sales activity will improve during 2009.

"The combination of the First Home Owners Grant and the significant rate cuts seems to have lifted consumer confidence, especially the first home buyers," said Mrs Goostrey.

This follows from comments made earlier in the week by property developer ,Nigel Satterley who believes the Perth residential property market is virtually at the bottom of its downward cycle.

Meanwhile, property developer Mirvac Group says it is starting to see early signs of growth in demand in the residential property market.

Mirvac has reiterated its latest earnings guidance of 13.4 cents per stapled security for fiscal 2009.

It indicated earlier this month a downgrade in its forecast from 23 to 25 cents per share offered in July, due to the impact of current market conditions on residential settlements and sales.

Chairman James MacKenzie today told Mirvac shareholders at its annual general meeting the company was starting to see "what we hope are early signs that the residential market and consequent demand for Mirvac product being stimulated".

The federal government's boost to the first home owners grant, measures included in the NSW government's mini-budget and cuts to official interest rates were welcomed by Mirvac, he said.

"These early signs are not factored into our projections, but are nonetheless cause for some cautious optimism and hopefully some good news in the not too distant future," Mr MacKenzie said.

Mirvac's gearing is about 27 per cent, he said, among the lowest gearing levels in the Australian real estate investment trust sector.

"We have significant headroom in all our debt related covenants," Mr MacKenzie said.

The company's recent $500 million capital raising venture has strengthened its balance sheet and enables Mirvac to confidently confront the current "distressed economic conditions", he said.

The capital raising led to Mirvac having all its capital commitments covered to June 2011 with an excess of $800 million, the chairman said.


Full UDIA announcement below:

 

MARKET HITS BOTTOM OF CYCLE


Land sales in the September quarter are the lowest on record but prices have steadied according to the quarterly Urban Development Institute of Australia survey.

UDIA released its preliminary land sales data today based on surveys of the major developers in WA which showed the number of sales during the September quarter was down 29.2% on the previous quarter and 39% as of the same quarter last year.

However UDIA CEO Debra Goostrey says there are signs that the market is already starting to improve.

"The traffic through sales offices has increased significantly since the tripling of the First Home Owner Grant and UDIA's weekly land survey has shown an increase in sales during late October," Mrs Goostrey said.

"While it is common knowledge that the market has been extremely slow during 2008 UDIA is confident, based on feedback from developers around the state, that sales activity will improve during 2009."

"The combination of the First Home Owners Grant and the significant rate cuts seems to have lifted consumer confidence, especially the first home buyers," said Mrs Goostrey.

Developers are providing affordable options for people in a range of areas, which will ensure people have a diversity of choice when it comes to buying land.

"Areas such as Armadale, which recorded the most sales in the quarter, represents terrific value with the average price of land at $197,783 and an average lot size of around 410m²."

"There are still a number of lots on the market in the Armadale area around this price and these represent a good investment opportunity,' Mrs Goostrey says.

Other areas to watch out for include Rockingham with an average price of lots sold at $206,679 and the City of Swan with average prices around $220,000 and of course Wanneroo remains popular. All these areas have blocks available to the market now and further supply in the pipeline for release within the next 12 months.

These areas offer good amenity with proximity to public transport, local shops and schools.

Many developers are also offering landscaping packages and other value for money deals when you buy land.

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