Property developer Mirvac Group expects its earnings growth to continue despite serious concerns about housing affordability in parts of the country.
Mirvac's profit in the year to June 30 rose 13 per cent from the previous year to $1.16 billion, driven by a improved values in its investment portfolio, particularly in Sydney and Melbourne, and stronger operational earnings.
Its operating earnings before interest and tax were up 17 per cent and it expects earnings to be six to eight per cent higher in 2017/2018, driven by yield from its investment portfolio, rental growth and returns from its development pipeline.
Mirvac said it is focusing on a shift into the build-to-rent sector - residential products with long-term leases - to address affordability woes.
Chief executive Susan Lloyd-Hurwitz said buying at the right time and in the right locations had ensured Mirvac enjoyed strong margins across a number of its residential projects, particularly in Sydney and Melbourne.
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She added that Mirvac expects to benefit from infrastructure investment by the NSW and Victorian governments, with a number of the company's residential projects located near proposed major transport lines.
"Our focused and disciplined urban strategy has consistently delivered stable earnings and distributions growth over the past few years and we expect full-year 2018 to be another successful year," Ms Lloyd-Hurwitz said.
Despite concerns over the potential impact of stricter lending requirements on the banks, she said sales activity across all projects had remained solid.
Mirvac's residential business delivered $302 million in earnings, an increase of 54 per cent, due to a record volume of lot settlements and gross margins above its target range.
The company's office and industrial division contributed $319 million in earnings, down roughly 11 per cent as a result of asset sales made in the previous financial year, while retail delivered $156 million in earnings, up 33 per cent.
Mirvac shares gained five cents, or 2.2 per cent, to $2.30.
PROPERTY VALUES BOOST MIRVAC'S PROFIT:
* Net profit up 13pct to $1.16b
* Revenue down 1pct to $3.02b
* Final dividend up 0.3 cents to 5.5cps, unfranked
