If yesterday’s announcement of AVJennings’ disastrous first six months of the financial year is an indication of the health of the first home buyer market, then a further interest rate rise will only further impact upon Australia’s home buying market.
Yesterday, AVJ announced an interim after tax loss of $2.4 million for the half year ended September 30, 2006 – down 126% when compared $8.9 million in 2005.
AVJ’s managing director Louis Milkovits said that while contract signings is approximately 10% higher at 1,215 units when compared to September 2005 – delays title registration for pre-sold property, particularly in Victoria, have resulted in lower turnover.
As a result, the company’s interim revenue was 10% lower at $212 million – compared $236 million in 2005. AVJ’s margins have also fallen to about 17% compared to 25% last year.
Milkovits said the most significant contributor to its reduced margins are depressed prices and higher government charges in Sydney.
The company’s performance in the current year has been severely impacted by the state of the housing market in Sydney and New South Wales generally, which historically had been its strongest area of operation.
“Whilst the company can allow for this new level of taxes in future acquisitions, for existing projects acquired prior to these tax increases, the tax growth impost is not possible to be absorbed by consumers and is therefore reflected in major margin erosion,” he added.
AVJ’s results echoes a special report from the ABC World Today program, which found mortgagee sales in Australia are on the rise.
Yesterday, the program reported that in outer suburbs of Sydney and Melbourne, the sheriffs are busy locking out more and more homeowners who can not make their payments
The World Today has established that in Sydney alone as many as 20 homes a week go under the hammer as mortgagee sales.
Meanwhile, Milkovits said the company’s intention is to increase its inventory turnover and reinvestment in less aggressively taxed states, particularly Victoria and Queensland.
“Victoria and Queensland now hold some 65% of the developable land inventory and this shift in geographic disposition is expected to reflect favourably in future year outcomes,”
Looking ahead, Milkovits said there has been a high level of pre-sales not recognised in this first half interim report which should be recognised in subsequent reporting periods.
“The full year outcome is expected to show a substantial improvement on the interim result and a return to profitability,” he added
As at September 30, 2006 the company has 8,526 developable lots.
Milkovits said the company has decided to defer a decision on the payment of an interim dividend until the second interim reporting period in March 2007.
By Nelson Yap
