A rise in homebuyer defaults has cast a shadow on an otherwise robust first quarter performance for property group Stockland (ASX: SGP).
With 4,772 contracts in hand at the end of the period, the latest figure is also tracking below the 6,006 sales in hand reported the same time last year amid the ongoing impact of higher interest rates.
Stockland has reported 991 sales across its Masterplanned Communities division during the first quarter, with sales and enquiries managing to rise month-on-month throughout the period.
But in a sign that interest rates are biting, the company says sales volumes are ‘expected to track at similar levels until the interest rate outlook stabilises’.
Stockland has also revealed that the default rate by buyers is currently above the 10-year historical average, although still below previous cyclical peaks. This time last year, defaults by buyers remained low compared to historical averages.
But in a sign that price increases have eased in the housing sector, Stockland says the average settlement prices for contracts in FY24 is expected to be 5 to 10 per cent higher than FY23. This compares with a 13.6 per cent increase in the first quarter of last year.
Stockland is targeting settlements of between 5,200 and 5,600 in its Masterplanned Communities division for FY24, implying settlements will be skewed towards the second half at a higher rate than FY23. The group settled 5,403 lots in FY23.
In other areas of the business, Stockland has reported sustained tenant demand in its logistics portfolio, which has achieved occupancy of 99.1 per cent.
Stockland is also progressing its $6.4 billion logistics development pipeline, with plans to begin construction on most of its $1.1 billion in active assets this financial year.
Meanwhile, sales growth in the group's retail centres has been underpinned by a heavy weighting towards essentials-based categories. Essential retail led sales growth, with a 7.6 per cent increase recorded, while comparable specialty sales were up 5.2 per cent.
“Stockland’s strong operational result for the quarter reflects the quality and resilience of our portfolio in an uncertain macroeconomic environment,” says Stockland CEO Tarun Gupta.
“Over 1Q24, our commercial property portfolio has achieved strong operational metrics, including accelerated rental growth in the logistics portfolio and positive leasing spreads in our town centres portfolio.
“The skew towards essential-based categories in our town centres underpinned sales growth of 7.6 per cent against a backdrop of increasing cost-of-living pressures.”
Gupta also notes the strength of Stockland’s land lease communities, where net sales of 111 homes were recorded during the quarter, with the result buoyed by improved enquiries. The result compares with 63 sales in the same period last year.
Stockland has maintained its guidance of delivering 34.5c to 35.5c per security in funds from operations (FFO) over FY24. The distribution to securityholders is expected to be within the target payout ratio of 75 to 85 per cent of FFO after tax.
However, Stockland warns that market conditions remain uncertain and this outlook remains subject to there being no deterioration in current conditions.
Get our daily business news
Sign up to our free email news updates.