Stockland on track for growth in south-west

Stockland is due to boost its longer-term earnings following the submission of development plans for its proposed $1 billion residential development at East Leppington, in Sydney's south-west corridor.

Plans include the construction of about 3000 dwellings, mainly homes, in a master plan that also includes a primary school, neighbourhood shops, sports fields, open spaces and recreational areas. The development will be located about 1½ kilometres from the station that will be on the new south-west rail link, under construction.

The area has been identified as a growth engine for the NSW government and is becoming an election hot spot for the federal government and federal opposition.

If approved, the new area will be adjacent to Camden Valley Way, which is also undergoing a major upgrade, and have access to the M7 and M5 motorways.

The project comes at time when the NSW residential market is showing signs of improvement.

Stockland's new chief executive, Mark Steinert, who releases details of his strategic review of the business on May 13, said the first lots in the project are expected to be settled in the next financial year.

Under his review, Mr Steinert is expected to change the group's present "three R" strategy of retail, residential and retirement, to the more traditional balance of office, retail, residential and development activities.

That could see the company return to a focus on higher-density apartments and the possible float or joint venture of its retirement assets.

Analysts said the East Leppington mixed-use project would be a boost for 2014-15 earnings.

Stockland head of residential Mark Hunter said on Wednesday there were signs of a rise in demand for new homes in Sydney's south-west growth corridor and that the planned East Leppington community would position the group "well for the future".

Mr Hunter recently revealed a 64 per cent drop in the group's residential communities reported operating profit, to $28 million, in the half-year results to December 31.

In February, Mr Hunter said lot sales were down 6 per cent on the previous year, while operating profit margins fell to 7 per cent, albeit affected by the change in capitalised interest policy.

"There has been little or no price gains for us," Mr Hunter told investors at the half-year results. "In fact, prices have decreased across most corridors."

Analysts at Bank of America Merrill Lynch said in a report this week that the downside risks for Stockland in the year ahead remained a further deterioration in debt markets, a protracted downturn in Australian residential markets and significant squeezing of development margins.