Defence Housing Australia

KPI 7: New properties constructed or purchased (MWD)

Corporate Plan target

810 properties

Achievement

727 properties

Result

In 2016–17 we added 727 properties to the MWD portfolio through construction and acquisition activities, which represents 89.8 per cent of the Corporate Plan target. The negative variance of 83 properties was not unexpected.

Our ability to add MWD properties to our portfolio was affected by external factors over which we had little or no control, including:

• residential property market conditions (property supply, capital values and yields) and Defence policy (minimum specifications for properties and rent band classifications) which combined made it difficult to source suitable properties in selected locations
• property development processes (approval processes, contractor management and project management, including inclement weather conditions) which delayed delivery of properties into our portfolio.

Refer to the overarching analysis for more information about these external factors.

Following discussions with Defence, and to take into account de facto RA, the target was reduced to 797 MWD properties in the provisioning schedule Defence approved in March 2017 (which forms our contractual KPI).

In the third quarter (Q3), we further revised the program down to 730 properties due to:

• Defence’s agreement to defer construction of 10 properties in Tindal (NT) to 2017–18
• delayed delivery of properties from two of our development projects in Melbourne (VIC) and Sydney (NSW)
• our decision to reduce the number of properties we would retain from two of our development projects in Sydney.

We were able to increase provisioning in some locations to mitigate the variance. This resulted in us achieving 99.6 per cent of the Q3 revised forecast.

Refer to the detailed report on performance for more information about MWD provisioning.

KPI 8: New properties constructed or purchased (MCA)

Corporate Plan target

247 properties

Achievement

213 properties

Result

In 2016–17 we added 213 properties to the MCA portfolio through construction and acquisition activities, which represents 86.2 per cent of the Corporate Plan target. The negative variance of 34 properties was not unexpected.

Our ability to add MCA properties to our portfolio was affected by factors over which we had little or no control, including:

• Defence policy (rent band classifications)
• residential property market conditions (property supply, capital values and yields)
• our MCA Agreement with Defence whereby we bear financial risk

(which means we could only acquire properties where there was a high probability we could recoup the capital outlay by selling the properties through our property investment program).

Refer to the overarching analysis for more information about these external factors.

We had particular difficulty acquiring suitable properties in Canberra (ACT), Cairns (QLD) and Ipswich (QLD). We were able to increase provisioning in some locations to mitigate the variance, but not enough to meet the target without bearing unsuitable financial risk.

We worked with Defence to review the MCA Agreement with the aim of revising terms to ensure we can meet future provisioning targets without bearing unsuitable financial risk. We expect both parties will agree on revised terms in the first half of financial year 2017–18.

Refer to the detailed report on performance for more information about MCA provisioning.