STOCKLAND has warned that it will incur a $48 million impairment charge on five residential community projects across the country, reflecting price pressure at the top end of the housing market.
Although the costs are only about 2 per cent of total book value, it comes after the 4 per cent earnings downgrade the group reported in March.
The chief executive of Stockland, Matthew Quinn, said yesterday the new housing market was at a cyclical low point and the group was on track to settle about 5000 lots for the year, or about the same as the previous financial year.
Speaking to analysts at the group's investor day, Mr Quinn reaffirmed the full-year distribution outlook of 24? per security he made on March 27.
At that time Mr Quinn said Stockland's settlement of sales in its residential business in February had slipped below the group's forecast and had slipped even further in March.
That was due to wet weather along the eastern seaboard and banks raising their interest rates despite the cuts to official rates by the Reserve Bank.
But Mr Quinn said yesterday Stockland had seen a "mild" upturn in sales last month and that the 50-basis-point cut in interest rates would "make a real difference to buyer sentiment".
"Sentiment towards home buying follows interest rates and we expect to see an increase in demand in our residential business if interest rates come down sufficiently," he told investors.
"We see the 2013 financial year as challenging and should start to reap rewards in the 2014 year."
CLSA analyst John Kim said cancellation rates for settlements rising to about 20 per cent and slowing pre-sales made him lower his residential volume and price growth assumption to minus 5 per cent and minus 2.5 per cent per annum respectively in 2013 and 2014.
"Coupled with high capitalised interest representing 17.7 per cent of residential inventory, we believe margins are set to decline to 16 per cent by the 2014 financial year," Mr Kim said.
Under Mr Quinn Stockland has focused on a three-R strategy of retirement, retail and residential. He said yesterday the retail and retirement businesses continued to perform well.
Stockland's chief financial officer, Tim Foster, said it was simplifying its accounting methodology for its retirement living division to be more transparent and closely aligned with cash.