Balwin Properties reports significant uptick in apartment sales as interest rates decline
Image: supplied
Balwin Properties, a prominent developer known for its environmentally efficient and affordable apartment estates, has announced a remarkable rebound in property sales during the latter half of its financial year.
Following the commencement of a new interest rate cutting cycle, which has seen rates reduced by a total of 75 basis points since September 2024, the company reported substantial improvements in trading conditions.
In the six-month period leading up to February 28, the company recognised revenue from the sale of 1 109 apartments, a significant increase of 73% compared to just 640 units sold in the first half. Additionally, pre-sales surged, with 814 apartments being contracted for future financial periods, up from 520 the previous year.
Group CEO Steve Brookes attributed this increase to heightened buyer interest driven by the easing of interest rates.
'The year under review was a tale of two halves, with a strong recovery in profitability in the second six months of the year, supported by ongoing cost-saving initiatives and a strong performance from the Balwin Annuity,' Brookes commented.
Despite this positive trajectory, while the interest rate relief was a welcome development, it fell short of expectations, and further interest rate cuts were anticipated for the new financial year.
The company's monthly average gross sales rate surged by about 30% since the start of the interest rate cuts, positioning Balwin to expedite construction activities as market conditions improve.
Even amidst a challenging economic landscape, Balwin reported an 8% increase in taxed profit to R234 million, with group revenue standing at R2.2 billion—a 6% decline from the previous year, reflecting ongoing pressures in the residential property market.
The anticipation surrounding the Government of National Unity formed in June 2024 was overshadowed by political uncertainty, amplified by global economic volatility. Nevertheless, earnings per share experienced a modest increase, rising to 49.74 cents, while headline earnings per share slipped 4% to 45.95 cents.
To adapt to the challenging market conditions, Balwin implemented measures to align construction rates with sales, which included better cost engineering, ongoing marketing, and incentives, as well as strict control over operating costs, which remained steady at R351m. The company's gross margin did improve to 30% from 28%, buoyed by contributions from its annuity businesses.
Focusing on regional performance, Gauteng emerged as the largest contributor to revenue with 856 apartments recognised, while the Western Cape demonstrated strong demand, with 801 apartments contributing to the sales figures—an impressive 99% of market offerings in the area were recognised in revenue. Despite a subdued performance in KwaZulu-Natal due to planning delays, management expressed optimism for future improvement as progress is made on these challenges.
Balwin's directors expect further interest rate cuts will likely stimulate a gradual recovery in the residential property sector. The company is committed to maintaining operational and development cost containment strategies to bolster profit margins and maximise returns on invested capital.
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With a robust pipeline of about 36 000 apartments slated for development over the next 12 years across major metropolitan nodes, Balwin'sdirector said the group is poised to emerge more efficient and focused, optimising operational processes for improved profitability.
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