Buyers switch to cash

Lendlease seeing effect of tighter lending

PROPERTY giant Lendlease is seeing longer settlement periods and higher cash buying as apartment buyers respond to a recent clampdown on mortgage lending by banks.

The company said residential pre-sales remained steady but customers were taking longer – between 28 to 30 days – to complete settlements at Australian apartment buildings.

“In Australia, we are working with buyers who need more time for settlement. We are also seeing increased use of non-banking sources of finance and also more cash buying,” chief financial officer Tarun Gupta said.

Australia’s major banks have tightened lending criteria for property investors over the past year – particularly for foreign investors, in response to the regulator’s cap on lending growth in the investor market.

“We are seeing an uptick in cash settlements, which are now 30 to 35 per cent. We are also seeing more non-banking finance entities writing loans for our customers,” Mr Gupta said.

Lendlease booked residential pre-sales of $5.7 billion, with 2037 units settled, including 628 apartments.

Apartment defaults continued to be minimal, at less than one per cent. The company delivered a 12 per cent lift in firsthalf profit, leveraging on its strength in the construction and office building space.

It reported net profit of $394.8 million for the six months to December 31, as margins jumped at its US construction business and sales were stronger at a number of its Australian office buildings.

Revenue rose 7.6 per cent to $7.95 billion. Lendlease lifted earnings for the development division by 10 per cent, in part because of the completion of the last of the three Barangaroo office towers in Sydney.

“Commercial development, in particular the Australian office sector, was a highlight of the first half result,” chief executive Steve McCann said.

The company made forward sales for three office buildings in Brisbane and Melbourne, and sold down a majority stake in the Circular Quay Tower development in Sydney.

The company declared an unfranked interim distribution of 33¢ per security, up 3¢ from a year earlier.