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Monday, 28 August 2017

Wicked leaks

Lend leaks

Staying down in Sydney tonight, at Darling Harbour.

Yes, it's as freezing as it looks - probably colder, if anything.

To the left of shot you can see the first three giant towers down at Barangaroo, part of one of Lend Lease's enormous flagship projects. 

Lend Lease (ASX: LLC) actually reported its FY2017 results this morning, which confirmed a solid+9 per cent lift in post-tax profit to $758.6 million. 

The market wasn't greatly moved, of course, since the group inadvertently dumped a stack of market sensitive information out to to the public at the beginning of the month, including the unaudited EBITDA (oops).

As accounting stuff-ups go, it was a rather impressive one (disclosure: I made similar goofs in my listed company career) though in the end relatively little harm was done, save a little embarrassment.

Defaults under 1pc

Reading through the investor presentation it was interesting to note a +20 per cent uplift in residential unit completions in the 2017 financial year.

Approximately 90 per cent of apartment completions have already settled, with a default rate of under 1 per cent.

This follows on from similarly low default rates reported by other developers during earnings season.

This is very important, for there had been fears of a wave of Chinese investor defaults following on from local lenders pulling up the ladder.

To date, this does not appear to have transpired.  

In other news, S&P reported a drop in loan delinquencies from 1.21 per cent in May to just 1.15 per cent in June. 

Declines were recorded "across the board" for 30,60 and 90 day mortgage arrears, with a corresponding fall in outstanding loan balances, with Queensland showing the biggest drop in arrears. 

This broadly mirrors what you'd expect to see given extremely low mortgage rates for homeowners, and a national unemployment rate that has been trending down for several years now.

No stress?

Countless media articles have claimed that mortgage stress is rising - often referred to as a "perfect storm" no less! - perhaps based upon household cash flow surveys.

But in reality so many households have been repaying ahead of schedule into offset accounts that it wouldn't be a surprise if some net monthly cashflows showed an outflow. 

With the aggregate value of the housing stock exploding to $7.1 trillion against mortgage debt of around $1.6 trillion, it also wouldn't be a surprise to me if some of the benefiting households have taken a breather on their earnings either. 

In any event, with the possible exception of Western Australia mortgage arrears remain low to date, which is about the only indicator that matters, when all's said and done.