Lifestyle Communities faces slower settlements as VCAT refunds begin

Victorian slowdown cuts first-quarter sales

Lifestyle Communities Limited (ASX:LIC) began FY27 with weaker sales momentum, reporting 39 net new-home sales and 37 established-home sales in the three months to 30 September. New-home sales were down 22% from 50 a year earlier, while established-home sales fell 11.9% from 42.

The company attributed the softer quarter to a more measured Victorian housing market, with prospective downsizers taking longer to decide whether to sell their existing homes and move. Conversion rates remained broadly stable, but appointment volumes were softer earlier in the quarter before improving in September. That late-quarter improvement is encouraging, though it has not yet translated into a stronger quarterly sales result.

Debt reduction continues alongside settlement risk

Lifestyle Communities reduced net debt by $8.4 million during the quarter to $265.3 million, extending the balance-sheet repair evident in its FY26 debt reduction. Inventory remained within target ranges across most communities, although Woodlea and Deanside were still above target; combined inventory at those two developments fell 9% during the quarter.

The sales slowdown matters because settlements lag contracts. The group had completed 42 new-home settlements by 30 September and held 214 contracts, but only 135 homes were identified as available for settlement in FY27. Of those, 29 customers had unconditional contracts to sell their current homes, 58 were actively marketing them and 48 had paid a deposit but had not yet listed. The remaining 79 homes are expected to settle in FY28 or later, leaving near-term cash realisation partly dependent on customers completing their own property sales.

Refund program adds a new call on funding

The VCAT-related refund process opened on 6 October after Deloitte was appointed to administer and verify claims from eligible former homeowners following the Victorian Court of Appeal decision. The first payments are expected in late October. Lifestyle Communities said those payments will be funded from working capital and existing debt facilities, reducing the carrying value of its $77.1 million provision for Deferred Management Fee repayments. The company previously introduced a new DMF model after the VCAT ruling, but the latest update does not quantify the total refunds expected to be paid under the current program.

Management is using the spring selling season to try to rebuild momentum, with a multi-channel brand campaign launched in late September and an all-community open day planned for October. The company is also targeting new-home prices at approximately 80% of the median detached-house price in each relevant catchment. The next evidence of whether that positioning is working will come through appointment volumes, sales conversion and settlements rather than the campaign itself.

The key tension is now clear: Lifestyle Communities is still converting contracts into debt reduction, but slower new sales and customer-dependent settlements could make that process less predictable just as refund payments begin. The company is due to provide a further update on the refund program at its 19 November AGM, by which point investors should have a clearer view of the cash impact and the strength of the spring recovery.