The booming housing market has proved a gift to one of Australia's largest apartment developers, Mirvac, whose profits surged 7 per cent in first half of the year, although defaults on its residential settlement have hit 2 per cent as investors struggle to get finance.
The diversified property group has a substantial residential development portfolio which it says will grow its earnings by 45 per cent over the year, after helping it report a first-half profit of $508 million.
![Mirvac owns office assets, such as 200 George Street, Sydney.](/web/20170216162106im_/http://www.smh.com.au/content/dam/images/g/u/d/t/7/r/image.related.articleLeadwide.620x349.gudt65.png/1487220103455.jpg)
Chief executive and managing director Susan Lloyd-Hurwitz said Mirvac had booked a record $3.1 billion in residential pre-sales, settled on 970 residential lots and was on track to settle another 2330 by the end of the financial year.
"While we expect a strong skew of earnings to the second half of the financial year due to the timing of residential settlements, we remain confident in our full-year earnings outlook," Ms Lloyd-Hurwitz said.
![Mirvac chief Susan Lloyd-Hurwitz says the property giant booked a record $3.1 billion in residential pre-sales.](/web/20170216162106im_/http://www.smh.com.au/content/dam/images/g/u/e/i/v/e/image.related.articleLeadwide.620x349.gudt65.png/1487220103455.jpg)
Mirvac has increased its full-year guidance to between 14.2¢ and 14.4¢ per stapled security, representing growth of between 9 and 11 per cent, she said.
Unit holders will receive 4.9¢ cents per stapled security this half year.
Mirvac, like many residential developers, faces growing concerns about an oversupply in apartments, particularly in Brisbane and Melbourne.
The developer said, while the number of buyers defaulting on residential settlements had risen to 2 per cent, 70 per cent of those defaults were resold with a "financial upside".
Most analysts were unconcerned about settlement risks.
Mirvac's residential pre-sales provided "good earnings visibility", assuming there weren't any major settlement issues, JP Morgan analysts told clients.
"This remains a watching brief for certain apartment projects," they said.
Shaw and Partners analysts were more sanguine saying they did not "share investor concern" over Mirvac's residential business and remain comfortable that Mirvac can hit its guidance.
Market speculation persists that Mirvac is a takeover target and it could look to divest the residential business.
Ms Lloyd-Hurwitz said suggestions of mooted changes to capital gains tax by the federal government should not be considered in "isolation".
"We need to take a holistic approach to any proposed reforms that affect housing," she said.
Like many other major property groups, Mirvac reported strong occupancy in its office portfolio which gained a valuation uplift of $230 million.
Overall, the group's profits included $277 million of revaluation gains.
Mirvac's industrial portfolio was nearly 100 per cent tenanted after the group leased 19,500 square metres over the period.
It had a weighted average lease expiry of 6.1 years. The group has also progressed with over $2 billion of committed commercial development projects.
Mirvac's retail centres were also near full with 99.7 per cent occupancy.
"While there has been recent pressure on certain retailers our continued focus on improved productivity and customer experience, along with a resilient tenancy mix, ensures that we are well positioned," Ms Lloyd-Hurwitz said.
"We have identified significant opportunity to add value to our retail portfolio, with 14 of our 17 retail assets having ... a future retail development pipeline of over $1 billion."