SYDNEY: Stockland Corp Ltd, Australia’s biggest residential property developer, nudged up its annual profit guidance on low interest rates and red-hot demand for homes, helping send its shares surging to their highest level in almost seven years.
Shares were also boosted as government figures showed Australian home loans rose more than expected in December and consumer sentiment growing to its highest in a year following a central bank rate cut this month.
Australian property firms like Stockland stand to benefit handsomely from the rate cut to record low levels – a rate cut aimed at stoking an economy grappling with a rapid contraction in commodity prices.
Stockland chief executive Mark Steinert shrugged off warnings from some economists that the rate cut will create a property bubble and told Reuters he expected an “elongated cycle” of property price rises.
The company now expects earnings per share to grow between 6.75% and 7.5% in the year to June 30, compared to the forecast it gave in August of growth of 6% to 7.5%.
“We expect at least for the next couple of years, and probably bit longer, a supportive residential market,” Steinert said, adding that demand for homes in Sydney, Melbourne and Brisbane were being fuelled by migration and population growth.
“The peak isn’t as high but the duration is longer than normal.”
The higher guidance came after underlying profit, which excludes portfolio revaluations, rose 9% to A$290mil for the six months to Dec 31, slightly ahead of a A$286mil profit forecast from Thomson Reuters I/B/E/S.
Including revaluations, net profit grew 55% to A$462mil.
– Malaysia Property NEws