Mirvac’s Residential business is founded on a reputation for delivering high-quality residential product in Australia’s key cities of Sydney, Melbourne, Brisbane and Perth.
With activities across both masterplanned communities and apartment projects, the Group’s integrated model ensures that expertise from all aspects of the business can be utilised: from design and construction to development and sales and marketing.
For the year ended 30 June 2016, the Residential division delivered earnings before interest and tax of $196m, while delivering a return on invested capital of 12.4 per cent.
Mirvac’s focus on delivering high-quality, innovative masterplanned communities and apartments ensured a strong result in FY16. Highlights across the residential business for the year ended 30 June 2016 included:
- settled a record 2,824 residential lots and achieved strong residential gross margins of over 24 per cent, driven by outperformance in masterplanned community projects in Sydney and Melbourne and apartment projects in Sydney;
- secured residential pre-sales of $2.9bn1, providing a high level of visibility in FY17 and beyond;
- secured approximately 1,900 new residential lots, including:
> Ascot Green, Brisbane, QLD: entered into a project delivery agreement with Brisbane Racing Club to develop the estimated $992m residential precinct. Mirvac intends to deliver over 1,000 apartments and will work closely with Brisbane Racing Club on an exciting retail village;
> Marrickville, Sydney, NSW: entered into a project delivery agreement with Marrickville Council to redevelop the old Marrickville Hospital in Sydney’s inner-west. Mirvac intends to deliver around 220 apartments, a library and community hub, as well as 1,200 square metres of open space; and
> Piara Waters, Perth, WA: the site offers an urban infill opportunity in an area abundant with existing infrastructure, amenity and demand for vacant space. Mirvac intends to deliver approximately 400 masterplanned community lots.
- entered into a joint venture partnership with Ping An Real Estate, a subsidiary of the Ping An Insurance Group of China, for two residential projects in Sydney, NSW. These include The Finery in Waterloo and St Leonards Square in St Leonards, demonstrating Mirvac’s ongoing focus on attracting third party capital to grow its business; and
- released over 3,900 lots with successful launches across masterplanned communities and apartments, including:
> Brighton Lakes NSW: achieved strong sales with 95 per cent of released lots pre-sold;
> Gledswood Hills NSW: achieved strong sales, with 83 per cent of released lots pre-sold;
> Harcrest VIC: achieved strong sales with 100 per cent of Stages 7, 9 and 10 pre-sold;
> Woodlea VIC: achieved strong sales with 95 per cent of released lots pre-sold; and
> Tullamore VIC: achieved strong sales with 76 per cent of released lots pre-sold.
> Harold Park, Sydney NSW: released the final stage of the last precinct, with 61 per cent of released lots pre-sold;
> Stage 2, Hope Street, South Brisbane QLD: achieved strong sales, with 96 per cent of released lots pre-sold;
> The Finery, Waterloo NSW: achieved solid sales with 89 per cent of released lots pre-sold;
> St Leonards Square, Sydney NSW: achieved strong sales with 90 per cent of released lots pre-sold; and
> The Eastbourne, Melbourne VIC: successful launch with 55 per cent of released lots pre-sold.
Conditions in the Australian residential market remain mixed nationally, varying from state to state and within states. Indications of buyer activity, such as auction clearance rates and price levels, suggest conditions have moderated in Sydney and Melbourne from very high levels, but remain solid; and while lending criteria has tightened, a low interest rate environment is expected to support continued demand. In Brisbane, affordability is favourable and future supply risks appear to be reducing given a decrease in approvals and construction finance for lower tier developers. Conditions in Perth remain challenging, as the transition away from mining continues.
Stricter lending criteria, both domestically and offshore, has sparked concern over the ability of purchasers to settle. To mitigate settlement risk, Mirvac has a range of strategies in place, and carefully and proactively monitors its settlement risk profile. In addition to a requirement of a 10 per cent deposit from purchasers, Mirvac has a structured communication and engagement program with its customers, and undertakes a thorough risk assessment of its exposure to foreign investment. Mirvac’s proven track record of managing its settlement risk is demonstrated by a history of low defaults, with a long-term average of less than one per cent.
1. Adjusted for Mirvac’s share of JVA and Mirvac managed funds.
2. These future looking statements should be read in conjunction with future releases to the ASX.