Villa World Shows Property Demand is Still Strong

For all the talk about property, one small company keeps chugging along with reasonably pleasing results for investors. I’m talking about Villa World [ASX:VLW].

Villa World is a residential property developer. On Monday it announced to the market it was upgrading its profit guidance. Villa World said previously in August that it was targeting net profit before tax of $40.5 million for the next financial year.

Now they expect that figure to be higher at $46.6 million because of strong sales since and a recent asset sale.

The Australian Financial Review reported this morning,

Villa World chief executive Craig Treasure said changes to bank lending for property investors had not softened sales. 

“The majority of our investor buyers live in the area and most of them have not had any concerns about the new regulations on investor lending,” he said.

The developer, which sells about 25 per cent of the house and land packages to first home buyers and owner-occupiers, said sales were strong and construction was ahead of schedule.

Treasure said the same thing in August when he was quizzed about the new macro prudential rules to property investors affecting his business. The results just announced seem to confirm what he said.

What’s perhaps even more interesting is at the time he downplayed the importance of interest rates compared to job growth as far as Aussie buyers were concerned. People have to feel confident that they’ll have a job to commit to buying. The recent good employment figures in Australia should keep him happy.

What now for the stock?

It’s always helpful to bring up a chart. Let’s take a look…
Villa World

Source: STEX

You can see that 2013 was the breakout year for Villa World. Since then it’s largely traded in a sideways range.  We’ll have to wait and see for now whether the stock can keep running.

But for now, the performance of Villa World suggests the property market is steady. If you’d like to know how to take advantage of the real estate cycle in the stock market, go here.

Callum Newman  

Associate Editor, Cycles, Trends and Forecasts

Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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