The Business

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Stockland firms focus on affordable property

Updated February 10, 2012 11:29:55

Stockland chief Matthew Quinn is taking the property group out of high-end and discretionary property such as office buildings and into more profitable affordable housing.

Source: The Business | Duration: 5min 18sec

Topics: company-news, building-and-construction, australia


TICKY FULLERTON, REPORTER: Property investor and developer Stockland's results today were below expected - net profit down 28 per cent to $308 million.

But the company still plans to meet its full-year outlook. And, as white collar city workers lose more and more jobs, Stockland's chief Matthew Quinn is sticking to a clear strategy: shifting out of offices and into retail property and growing in the affordable housing market.

I caught up with him after his results.

Matthew Quinn, thank you very much for joining me.


TICKY FULLERTON: What I find really fascinating is your take on the housing market at the moment. You feel you've actually been through the low, don't you?

MATTHEW QUINN: In our segment, yes. And that's the important point. For example, at the moment, anything to do with the top end, discretionary is not good. Anything to do with affordability, where people are buying things for a reason and they can afford it, is actually quite good.

TICKY FULLERTON: And that's very much your focus.

MATTHEW QUINN: That's our niche, and that's been our niche for quite some time. Deliberately so because we want to have the most mass market appeal.

TICKY FULLERTON: But one of the things that's tightening up of course is the credit and the financing for buyers of houses. Are you seeing this and are you worried about a tightening going forward?

MATTHEW QUINN: We have seen that as a trend over the last two to three years. This is nothing new. It's something we've had to deal with post the GFC.

We haven't had any non-bank lenders actively in the market, so it's pretty much come down to the major markets now. I think personally they've taken a very responsible approach to lending. We see people who should get a loan who are creditworthy do get a loan.

TICKY FULLERTON: Just while we're on banks, what do you make of this new wave of covered bonds?

MATTHEW QUINN: Well, I think it's a good thing. It's something that's been mooted for some time. Whatever we can do to open up credit access for the banks is a good thing. But we've got to look at the cost, the overall cost, and what impact that has on the end consumer.

TICKY FULLERTON: What you're saying is if there is a big proportion of covered bonds that are actually issued, that might actually drip through to the customer?

MATTHEW QUINN: That's the extent of my knowledge. I'm not a banking expert.

But I just see that as an issue that's out there. Anecdotally and directly we hear from our banks, we talk to them often, that their cost of finance is going up. And ultimately, if they're able to protect their margins by passing that on to the end consumer, then that's potentially going to hurt our customers.

TICKY FULLERTON: Anecdotally, a colleague of mine was saying that he thought that the Melbourne estates that you were now building, the lot sizes are actually a lot smaller than in Sydney. Is there a big difference?

MATTHEW QUINN: There is. And there's a couple of reasons for this - and in Perth as well. Melbourne, the State Government and the local authorities are very receptive to us doing this.

They see this as a benefit because of the quality of what's built, what goes on the ground, and the fact that it's bringing people into affordable home ownership and stopping the consumers at large having to borrow too much money.

There are certain parts of the country, Sydney is one, up until recently, we have seen a change with the recent State government where to actually get a block of land on the market below 450 square metres would be very, very hard for us to achieve the approvals, when in Melbourne that would be pretty straightforward.

TICKY FULLERTON: The offices and industrials market does look pretty dire. What is your outlook for it?

MATTHEW QUINN: Again, it's very case specific.

Sydney CBD office space is pretty tough at the moment. White collar employment is diminishing. There's bit of supply, vacancy is high, lease incentives are high.

Perth on the other hand is going very, very well, so it's very case specific. The reason we're making this shift is fundamentally because in retail we know we can add value through development.

TICKY FULLERTON: And you're still confident, given how soft the retail market is becoming, because people talk about a structural change in the level of the Australian dollar, you've got the online threat.

MATTHEW QUINN: Again, it's all about the segments that we operate in. We are, as we are in residential, we are in affordable, needs-based centres, a lot of them in regional areas where we are the main game in town.

What it means though is because we're focusing on a product that is needs-based and affordable, our sales rates are much higher than those that are in disposable discretionary areas.

For example, in the last 12 months, the comparable growth in our retail sales in our small shops was 4.5 per cent. The equivalent number that came out of the ABS the other day was 0.2 per cent.

So we're significantly outperforming the broader market because of our focus on that mass market segment.

TICKY FULLERTON: Your shift to needs-based, to affordable housing is a major repositioning and it's one that obviously you're in for the medium-to-long-term. That says to me that you're expecting this economic climate to stay like this for some time?

MATTHEW QUINN: Well, I am, but we actually started this about five years ago. Interestingly, we actually started our affordability strategy in residential in 2008, really before the GFC had happened, because at that point in time housing affordability was actually more of an issue than it is now because interest rates were so high.

So, a bit of luck, a bit of judgment. We actually focused on this affordability strategy for a different reason, but it's now paying dividends because of the overall economic conditions, the access to credit and the downturn in discretionary spending. So, a bit of luck and judgment, but we seem to be in the right zone at the moment.

TICKY FULLERTON: You do indeed. Matthew Quinn, thank you very much for joining us.

MATTHEW QUINN: My pleasure. Thank you.