News Article

Rising house prices make great Aussie dream smaller

10/02/2012 -

The great Australian dream just got smaller.

- Kim Christian

Property group Stockland says unaffordable house prices have driven people into buying homes on lots that are less than a quarter of the size of the traditional quarter acre block.

Stockland on Thursday revealed the smaller blocks were proving popular with buyers, particularly as affordability becomes the biggest issue confronting home hunters.

Managing director Matthew Quinn said residential sales had been a positive for the group which had successfully trialled the sale of freestanding houses on 250 square metre lots across Australia.

Smaller house and land packages were now best sellers for the group, including 210 square metre lots in one state.

"People's resistance to small lots and small houses has gone," Quinn told analysts on Thursday.

"It's now about affordability."

But the popularity of the smaller blocks was not enough to stop Stockland from suffering a 28 per cent fall in first half net profit due to tough economic conditions.

Stockland, which is shifting its focus from office assets to retail, reported a net profit of $307.6 million in the six months to December 31, 2011, down from $425.1 million in the previous corresponding period.

The group recorded a reduction in overheads across the business and its strategy of reducing lot sizes to help improve affordability led to a four per cent increase in revenue from single lot sales.

Stockland expects a better performance in the remainder of the financial year, as residential property sales picked up in the final four months, particularly from first-home buyers.

Quinn said affordable housing markets in Perth and south-east Queensland had now turned the corner after foundering last year.

"The signs are that both south-east Queensland and Perth are much more positive than they were six months ago," he said.

However, he said the improvement only applied to the company's affordable house and land products.

High-end properties and some apartment locations continued to struggle while house prices generally came under pressure due to a lack of affordability.

The group still expects its earnings per share (EPS) for the financial year to be the same as in the previous year, assuming current residential conditions continue.

EPS in 2010/11 was 31.6 cents and 14.9 cents in the first half of 2011/12.

Quinn said economic conditions were very tough at the start of fiscal 2012 resulting in poor consumer sentiment, reduced discretionary spending and weaker demand for Sydney CBD office space which affected the group's result.

Conditions would remain challenging due to tighter credit markets, pressure on the Australian economy and tough property markets.

Still, Quinn said Stockland was well-capitalised with a strong balance sheet and good opportunities for revenue growth in the second half, particularly in its retail and residential businesses.

Office earnings were lower than last year, primarily due to asset sales and the weak demand in the Sydney CBD.

Stockland shares closed six cents lower at $6.21.

Source: AAP NewsWire

Browse the IndustrySearch directory: Building & Construction Equipment