Home builder Stockland has cut its full year earnings guidance and blamed high interest rates and wet weather for the slowing of property sales.
Securities in the property developer fell four per cent after it revealed first home buyers and upgraders were finding it increasingly difficult to obtain finance and that home affordability pressures were unlikely to improve any time soon.
Stockland lowered its forecast for earnings per share (EPS) to 30.5 cents, from its previous forecast of 31.6 cents.
It also said its distribution to securityholders for its full year would not be affected by the lower earnings.
Stockland managing director Matthew Quinn said residential sales in March were below that of February, prompting the company to downgrade its guidance amid predictions of soft sales for the rest of the financial year.
“We don’t see any triggers that will lead to an increase in activity any time soon,” Mr Quinn told analysts.
“It is very sensitive to interest rates and certainly if the Reserve Bank did drop interest rates and those reductions were passed on by the banks that would spur people on.”
Stockland said sales had fallen since banks lifted their interest rates in February despite the Reserve Bank of Australia keeping the cash rate on hold.
The company said cancellations of property purchases had risen by between 15 and 20 per cent in the past few months as potential homebuyers were unable to obtain finance.
“These are buyers who we would expect to get approval,” Mr Quinn said.
“It’s causing an issue in the market place because there are a lot of buyers who want to move or a lot of first homebuyers who want to come into the market because rents are going up and they’re finding that they’re not able to get finance.”
Stockland had discounted some residential properties to manage its working capital but said it would not match competitors’ discounts of up to $50,000 to $70,000 on a $250,000 block of land.
The company’s securities closed 14 cents, or 4.46 per cent down at $3.00 on Tuesday.
Stockland said wet weather, particularly in the Illawarra region of NSW, had delayed production and pushed the settlement of some developments back into the 2012/13 financial year.
Affordability was another reason for the softness in the marketplace as interest rates and the cost of living both continued to rise, Mr Quinn said.
Goldman Sachs JBWere analyst Simon Wheatley said the surprise downgrade showed people were reluctant to purchase property in a slowing market.
“Stockland didn’t sound very optimistic for the next 12 months,” Mr Wheatley said.
“If they’re saying the 10 basis point increase (in mortgage rates) by the banks had a meaningful negative impact, then if rates were cut then you would expect it to have a pretty quick positive flow-through, so we could expect things to get better after the calendar year.”