Stockland profits jump on housing demand but CEO Tarun Gupta sounds interest rate alarm

Stockland chief executive Tarun Gupta says the macro environment is uncertain. Picture: Jane Dempster

The country’s largest residential developer, Stockland, has warned that the economic environment is uncertain, singling out the potential impact of rising interest rates on the housing market.

While the company delivered a strong first half on the back of government stimulus to the housing market, it acknowledged the changed environment this year even as it lifts volumes.

Investors have sold off the company since concerns about higher inflation emerged late last year, and despite the surging performance of its beefed-up housing unit – it bought Lendlease’s housing unit in late 2024 – concerns remain.

Stockland chief executive Tarun Gupta said it was too early to see an impact from the latest hike in interest rates, with ripples only likely to register once a second or third rate rise has happened.

“The macro environment, including interest rates, remains uncertain,” he said. “The sales impact follows … six to nine months later,” he said.

Stockland CEO Communities Andrew Whitson, said the effect of the rate rise had not been seen so far on the ground, with buyers not yet holding back.

“We’re not getting that feedback,” he said.

He instead pointed to the lack of housing stock to sell due to supply constraints.

“In three of the four states we operate in, if we had more to release we would be getting more sales,” he said, noting limits on supply in southeast Queensland and in WA.

Stockland said that the government’s expanded first homebuyer guarantee was driving demand across the market, with Mr Gupta saying there was a pick-up from this segment even ahead of the government scheme expanding.

The developer has pivoted towards more affordable housing due to buyers’ financial constraints in recent years and it is well positioned to benefit from the post-pandemic surge in immigration as people who arrived three to four years ago now look to buy.

“We are seeing good demand for that affordable-priced product,” Mr Whitson said.

Mt Gupta said some government incentives had helped buyers into the market but argued that more needed to be done to boost the supply of housing, which has fallen behind government targets.

He said that state governments had acted to aid investment but some councils were still slow in approving projects and suggested using incentives and boosting resources for planning.

Mr Gupta said that Australia did not have enough skilled workers to deliver the housing required, with the same constraints emerging each time demand picked up. To address labour shortages he called for more training in trades and to bring in skilled migrants.

Stockland was positioned for a “step change” in the next financial year as the company developed more houses and land-lease estates, Mr Gupta said. He said there was also opportunities in logistics, data centres and large scale mixed-use developments, where Stockland has become a bigger player.

The company will shift capital out of traditional areas like offices into data centres, where it is locking down approvals for three major projects across Sydney and Melbourne.

Stockland turned in a $292m interim profit as its housing division surged. That was up on $245m in the previous corresponding period and included positive net property revaluations of $32m.

The company’s post-tax funds from operations, a measure of property earnings, jumped 29.5 per cent to $325m. It will pay a half-year distribution of 9 cents per security.

Stockland gave guidance of between 36c and 37c of funds from operations per security for the full 2026 financial year, with a distribution per security expected to be 25.2c per security, in line with fiscal 2025.

The company said the result was underpinned by a material uplift in housing estate settlement volumes, higher development fees and a resilient performance from its logistics and retail portfolios, with earnings growth supported by higher development production. Investment management delivered funds from operations of about $296m, in line with the previous corresponding period.

The development segment delivered funds from operations of $156m, up from just $36m in the first half of 2025, with a much bigger contribution from housing as well as more income from the partnerships which Stockland, under Mr Gupta, has been setting up.

The shift into data centres is taking off and Stockland has 350MW of power secured for projects in Laverton North in Melbourne and at the Brooklyn distribution centre in West Melbourne. A Sydney project is also planned. Mr Gupta flagged that data centres the company developed could also be sold to institutions in future.

Stockland also expanded its land-lease business via a tie-up with an existing investor by forming a new 50/50 partnership in the hot area. It will be seeded with two projects with an end value of $200m.

Housing was the real driver of the result and the company had 3168 settlements – a huge 60 per cent jump – and development operating margins hit 18.1 per cent, up from 14.2 per cent in the first half of fiscal 2025.

The company stuck to its settlement target of between 7500 and 8500 lots, and it has 5458 contracts on hand.

Mr Gupta said the company remains well positioned heading into the second half, supported by strong operational momentum.

Development earnings and operating cash flow are expected to be “materially weighted” to the second half, reflecting the timing of housing settlements.