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Property stgeloper Lend Lease Corporation Ltd expects house prices will recover but does not anticipate big rises despite a housing shortage in Australia.

Lend Lease chief executive Steve McCann said there was a general shortage of housing in Australia, which gave him confidence that the downturn in the housing sector would “bottom out” and start to recover, hopefully soon.

“We don’t see massive pressure on prices, and it will take some time for the economy to get back into full swing, and that should result in the right sort of balance there, we think,” Mr McCann told ABC television on Sunday.

Mr McCann said the situation was different to the United States, where some areas had been “horribly overbuilt” and house prices had fallen significantly.

“We don’t have much of a presence in the US,” Mr McCann said.

He said that in London, in the United Kingdom where Lend Lease was focused, the housing market was in a similar position to that of Australia.

“There’s a significant housing shortage, and the amount of building approvals in the last two years in London has been well short of what’s required to meet demand,” he said.

“So, again, there are signs that in the medium to longer term that market should be quite robust.”

Mr McCann affirmed that Lend Lease was on track to achieve an annual net operating profit of around $300 million.

In May, Lend Lease revised down its guidance for full year net operating profit for the 12 months ending June 30, 2009 to an operating profit after tax of about $300 million.

“The market expectation is around the $300 million number, and we’re still on track to deliver that,” Mr McCann said on Sunday.

Mr McCann said the group’s construction arm, Bovis Lend Lease, was getting more work from government contracts, and the proportion or earnings in Australia coming from government work was now around 50 per cent.

“It was a lot lower than that historically, and we’re hoping that in the next week or so, we’ll announce another schools project, which will take the total amount of schools projects we’re procured to over a billion dollars,” he said.

Mr McCann also said that Lend Lease had not lost a potential $3 billion contract with the London City Council over the restgelopment of the Elephant and Castle neighbourhood, a 23-hectare area some 3km from London’s West End.

Mr McCann said that although an exclusivity period for negotiations with the council had recently expired, Lend Lease was still in talks with the council.

“The reality is it will come down to whether it is a commercially viable project in the short term,” Mr McCann said.