One of Australia’s major housing developers, Australand, has blamed poor affordability and the lack of growth prospects, especially in Sydney, for its decision to move further away from what used to be its key business, housing developments.

Speaking at the company’s AGM in Sydney yesterday, the about-to-retire CEO, Brendan Crotty, told shareholders:

Australand intends to gradually reduce its exposure to the residential sector, in a measured way, during the next three years. While some may question this strategy because of the likelihood of a cyclical upturn in residential property during the next two years, it makes more sense for Australand to invest additional capital into sectors that will generate not only similar levels of development profits, but also additional investment property assets.

It was a gloomy summation of the housing outlook in this country that a leading developer has decided to downgrade its involvement, even as it freely admits that there could be a recovery in the market around the corner:

The outlook for residential property development still appears to be uncertain. While the fundamentals for the residential property sector in terms of rental vacancies and demand/supply equilibria continue to improve, market sentiment has not improved and affordability continues to be an issue in Brisbane, Sydney and Perth.

A recovery in the residential sector may only occur if and when interest rates start to trend downwards and affordability improves, though presently there is a slightly higher probability that interest rates may increase before they fall…

… affordability pressures and the low rate of growth in Sydney’s full-time work force suggest that a recovery in any of Sydney’s mainstream residential property market segments will not occur for a while.

The shares hardly budged in reaction to this significant switch in policy. They closed up 2c at $2.28. Australand intends moving deeper into commercial property in and around its residential developments or wherever it can find value, and will include small, neighbourhood-style shopping centres.

It will follow the company’s move into other areas of property in recent years, such as commercial and industrial developments, reducing its dependence on the housing market.