If Stockland’s warning this morning is anything to go by, the RBA has some work ahead of it if it wants to deliver on its plan to stimulate new dwelling construction:
Stockland will update securityholders on its current performance and outlook at its Annual General Meeting in Sydney today. Stockland’s Residential business has continued to come under pressure in the first quarter of the FY13 financial year, reflecting the deep cyclical low in the housing market.
Managing Director Matthew Quinn reiterated that this is the worst new housing market he has seen in more than 20 years and that this will cause a substantial decline in earnings per share in FY13. Conditions in Victoria are particularly challenging following the end of state government stimulus on 30 June 2012; sales volumes have halved and aggressive discounting is required to clear stock.
“I said in August that without a significant improvement in the residential market in the first quarter, our earnings per share in FY13 will be lower than last year. Unfortunately, it is now clear that this will be the case and FY13 EPS is likely to be around 10% below last year and could be up to a further 5% lower if conditions don’t improve in Victoria, where our profit per lot is significantly higher than the rest of our portfolio,” Mr Quinn said.
The RBA has about nine months to turn this into a driver of private investment sufficient to offset falling mining investment. State government policy will help but it’s no small challenge.
