PROPERTY company Stockland says profits might slump 10 per cent this year as it struggles with sales in the "worst new housing market" in more than 20 years.
The company was facing a "deep cyclical low" and tough conditions in Victoria, the location of its most profitable residential estates, managing director Matthew Quinn told the annual meeting yesterday.
"Profit in our residential business is expected to be around $50 million lower this year than last year, with potential downside of a further $30 million if conditions in Victoria don't improve," Mr Quinn said.
Sales volumes in the state had halved and aggressive discounting was required to clear stock, he said.
The company's woes follow yesterday's release of Australian Bureau of Statistics figures showing the value of private residential building work fell to $10.47 billion in the June quarter, a 10-year low.
But the ABS figures also showed that, as spending on residential building slowed, engineering construction was still powering along at a historic high of $22.45 billion.
Over the past four years, Stockland has refocused on its residential, retail and retirement businesses, all of which are affected by the cautious consumers of today.
Its net profit of $487 million for 2011-12 was down 35.5 per cent from the previous year.
Home buyers were still focused on paying off debt, Mr Quinn said.
"We started the year with around 700 fewer contracts on hand than the previous year, reflecting the sluggish market in FY12, and so far we are not seeing any improvement."
But the company's 41 shopping centres, valued at more than $5 billion, were making above-industry-average returns and would deliver future growth. Profit margins were likely to improve in 2013-14, although it would take "two to three years of good volume and price growth to restore our margins back to historical levels", Mr Quinn said.
Chairman Graham Bradley told shareholders the search for a replacement for Mr Quinn, who leaves the company early next year, was "progressing well".
Stockland's shares closed down 13? yesterday at $3.42. Other property companies, including Mirvac, GPT and Australand, also fell marginally.