Share prices rise on the back of positive housing sentiment

More good property market news this week is adding to speculation that prices and sales volumes are trending up.

Stockland’s share price rose nearly 6.5 per cent by the close of trade on Monday 21 October to end the day at $44.90. It was the best-performed stock in the ASX 200.

The country’s largest residential developer is attributing part of its success this financial year to a swift turnaround in the Sydney and Melbourne housing markets.

“We are confident that the residential market has bottomed and the pace of recovery is improving, particularly in Sydney and Melbourne,” chief executive Mark Steinert said.

“The outlook is favourable for our Communities business given an expectation that reduced housing starts will see an undersupply emerge over the next 12 to 24 months.

Stockland recorded its strongest quarterly result this calendar year, with its housing business performing “moderately above expectations” in the three months to the end of September.

The $11.7 billion capped Stockland is on track to deliver on its target of 5000 settlements in the 2019-20 financial year. It expects that due to steady employment growth, record low interest rates, recent tax cuts and the high investment in infrastructure, its business would continue to grow.

Apartment undersupply

On the point of undersupply, the Commonwealth Bank (CBA) forecasts a shortage of apartments by 2020.

“CBA estimates suggest an undersupply of apartments from 2020,” CBA economist Kristina Clifton said.

This is problematic as an undersupply of housing could put downward pressure on vacancy rates and further upward pressure on rents and dwelling prices.

Several industry leaders are forecasting a potential supply shortage within 18 months.

However, it does bode well for developers and new developments even though off-the-plan apartments are yet to follow the improving market trend.

According to August data released by CoreLogic, newly constructed off-the-plan apartments in Sydney (10 per cent) and Melbourne were valued less at the time of settlement than when their owners first put ink on the contract.

It is one glitch in an improving market and whilst developers are wary, they seem undaunted and more buoyant by increasingly positive conditions.

Positive outlook

Mirvac is another listed property developer benefitting from a property market turnaround.

Like Stockland, the $12.4 billion capped Mirvac’s numbers are rising.

Mirvac shares were worth $3.19 before the start of trade on Tuesday 22 October, up almost 42 per cent per cent this calendar year.

Its strong performance is on the back of Mirvac settling 613 residential lots over the three months to September 30. It was on track to hit 2,500 settlements for FY20 and has secured 86 per cent of its full-year residential earnings.

“As we foreshadowed at our FY19 results, we have passed the bottom of the residential cycle,” chief executive Susan Lloyd-Hurwitz said.

“There are now clear signs of improvement in the Sydney and Melbourne established housing markets with lifts in loan approvals consistent with the upturn in auction market activity, prices and turnover.”

As loan approval do increase it may be worth checking out how much you could borrow if looking to break into the housing market or upsize or where the best suburb is that meets your budgetary requirements.

Enquiries about its residential developments has increased over the first quarter of this financial year. For Mirvac, that indicates a rise in sales is imminent, along, perhaps with a rise in value.

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The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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