This article is from the Australian Property Journal archive
HOME builder AVJennings believes it is well-placed to capitalise on record migration and low housing supply once it clears short-term hurdles, as it posted a 62.6% increase in profits on the back of a jump in lot settlements.
Full-year profit after tax was $21.26 million, while revenues lifted 23.1% to $274.3 million.
It recorded 732 lot settlements, a 20% increase it said was “primarily driven by strong demand for AVJennings’ land as the impact of the previous year’s sales, driven by HomeBuilder stimulus, settle”.
No final dividend was paid, making for a total dividend of $1.10, down on the previous year’s $1.77.
CEO and managing director Phil Kearns said macroeconomic conditions, including the impact of 12 interest rate rises in Australia since May last year, and general uncertainty around home builders for land purchases have collectively contributed to reduced buyer confidence and market uncertainty. The result was signings slashed by more than half, from 853 to 348. There 321 lots presold, at a value of $130 million, to be carried into FY24.
“This, along with enquiry rates in line with our longer-term averages, indicate an underlying level of demand, although tempered by external factors in the short-term,” Kearns said.
“We expect muted sales levels to continue until there is greater certainty in the interest rate cycle and inflation moderation.
“While we believe we are near the top of the interest rate cycle, the possibility of further increases in interest rates and rising costs of living both pose a risk to the housing market.”
Net operating cashflow fell into negative territory, to -$41 million, down $74 million, driven by a significant increase in production activities across apartments, built-form housing and large land projects in early stages of development.
“As we navigate through the evolving landscape of the residential property market, we continue to see several macroeconomic opportunities that bode well for our growth prospects once consumer confidence improves. Simultaneously, we are mindful of the near-term risks that demand our attention and strategic planning,” Kearns said.
“The substantially heightened inflow of immigration, currently at its highest since 2008, presents a significant opportunity for AVJennings. As the population increases, so too does demand for housing and at a time when supply is well below long-term levels.”
The National Housing Finance and Investment Corporation is forecasting a shortfall of 175,000 homes by 2027.
Kearns said that although demand is currently tempered, AVJennings expects an increase in consumer confidence to translate through to increased demand once the macroeconomic environment stabilises.
“The recent growth in house prices in the established market usually has the effect of pushing potential home buyers into the market. As a residential property developer with a diversified product offering, AVJennings is uniquely positioned to capitalise on this trend by quickly responding to changes in market sentiment and increasing supply to market in line with demand.”
