Australia’s Stockland Says Housing Supply to Temper Price Rises

Stockland (SGP), Australia’s biggest diversified property trust, said additional housing supply in Australia’s state capitals will help temper price increases that have accelerated in the cities since the start of the year.

“Inner city markets generally have strengthened considerably and that’s all about supply constraints,” Mark Steinert, chief executive officer of the Sydney-based company, told the Inside Business television program according to a transcript. “You are seeing apartments and high-density coming in to address that demand in a lot of the capital cities, particularly in Sydney and Melbourne and Brisbane, so I think that will even see some tempering.”

House and apartment prices across Australia’s biggest cities rose 5 percent in the year to Aug. 31, according to the RP Data-Rismark Home Value index. Prices in Sydney may surge by as much as 20 percent in 2014, as record-low interest rates drive demand amid short supply, according to Sydney-based SQM Research Pty. Across the nation’s major cities, prices could jump as much as 11 percent on average, assuming no more than one interest-rate cut of 25 basis points by the central bank, SQM said.

In metropolitan locations such as Sydney and Perth, pent-up demand as well as under-supply of new housing have driven up prices, Steinert told the Australian Broadcasting Corp.’s Inside Business. “Governments have worked pretty hard to change that, to fast-track urban growth corridors. I’m definitely not concerned about a bubble.”

Loans Climb

The Reserve Bank of Australia’s 2.5 percent benchmark rate has pushed the country’s average standard variable mortgage rate down to 5.95 percent, the lowest in more than four years. The number of loans approved for the purchase of new homes climbed a seasonally adjusted 43 percent from a year earlier in July, government data showed.

Stockland, which saw profit plunge 79 percent in the 12 months to June 30 amid weakness in its residential division, is seeking to take advantage of a turnaround in Australia’s housing market. It began sales last week on its 350-hectare Willowdale development in Denham Court, a southwest Sydney suburb, amid a 7.8 percent surge in detached house prices across the city in the eight months to Aug. 31, based on RP Data figures.

The first two stages at Willowdale, with 95 lots, sold out on the day sales started, and Stockland is planning a third release next month, the company said in an e-mailed statement.

Steinert, who took over as managing director from Matthew Quinn in January, backed away from his predecessor’s strategy of building only detached housing, saying he will begin developing medium-density residential projects.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Stanley James at sjames8@bloomberg.net

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