Sydney - Mirvac, a leading property developer, has announced a net loss of AUD 201 million for the six months ending in December. This marks a significant decline compared to the AUD 215 million profit reported during the same period the previous year. The poor performance was primarily attributed to a devaluation of their investment property portfolio, amounting to AUD 396 million.
Despite the loss, Mirvac remains optimistic and has maintained its annual targets for earnings and distributions. Operating profit saw a 17% decrease, amounting to AUD 252 million, while earnings before interest and tax fell by 3.9% to AUD 372 million. On a positive note, half-year revenue rose substantially by 47%, reaching AUD 1.26 billion.
The continued challenge posed by high-interest rates has impacted homebuilders, as potential buyers carefully consider whether they can handle the burden of a home loan alongside other rising living expenses. In November, the Reserve Bank of Australia raised interest rates by 25 basis points to 4.35%, further exacerbating the situation. Additionally, retail banks have withdrawn cashback offers for property owners looking to refinance deals established during the pandemic.
Fortunately, many economists believe that the interest-rate cycle has already reached its peak, suggesting that these obstacles may gradually diminish in the coming months. In fact, inflation hit a two-year low in the final quarter of 2023, falling below the projections made by the Reserve Bank of Australia in November. Consequently, economists predict that the RBA may commence rate cuts in the second half of this year.
The response of homebuyers to this adjusted trajectory of interest rates will be closely monitored. Some may take advantage of early property acquisition, fearing that home values will rise once borrowing costs actually decrease. Moreover, the current strong migration trend offers further support to the housing market, as Mirvac consistently highlights the shortage of available properties.
Mirvac Reports Strong Settlements and Leasing Momentum in H2 FY2024
Mirvac, a leading Australian property developer, announced on Thursday that it successfully settled 1,131 residential lots in the last six months of 2023. The company also reported robust levels of enquiry, indicating strong underlying demand. The total pre-sales amounted to an impressive A$1.5 billion.
Despite the subdued residential sales activity during the first half of the financial year, Mirvac remains optimistic. Chief Executive Campbell Hanan stated, "We have a flexible launch program with well-located product that is ready to benefit from improved buyer sentiment."
Mirvac also noted a significant leasing momentum in its office portfolio during the first half of the year. The company experienced positive income growth across its office, retail, and industrial properties.
However, the high interest rates pose challenges for the residential business, impacting both consumer spending and Mirvac's own debt obligations. To mitigate these effects, the company strategically hedged a majority of its borrowings to cushion any potential impact.
Hanan outlined the key priorities for the remainder of the financial year, including achieving their planned residential lot settlement target, progressing tenant pre-commitments, securing capital partners for the prestigious 55 Pitt Street project in Sydney, and finalizing the sell-down of Aspect South. Additionally, Mirvac is engaged in discussions with capital partners in its residential business to ensure a healthy balance sheet.
The company maintained its guidance for operating earnings per security for fiscal year 2024 in the range of 14.0 cents to 14.3 cents. Although this represents a decrease of 2.7-4.8% compared to the previous year's achievement of 14.7 cents, Mirvac remains confident in its long-term prospects.
