Balwin rebounds but economic pressures dampen housing demand

Residential developer Balwin Properties has reported mixed results, with a stronger second half hinting at recovery, though high interest rates and political uncertainty weigh on demand.

The 75 basis point interest rate cut offered limited relief, while optimism after the June 2024 government of national unity (GNU) formation had faded amid policy divisions and global volatility, the group said in results for the year ended February.

These challenges mirror a broader global cooling in the property sector in recent months, driven by persistent inflation, rising interest rates and geopolitical instability, all of which weighed on investor sentiment and homebuyer affordability.

The group generated 62% of its annual revenue and 67% of its profit in the second half of the year, reflecting improved trading conditions.

“Despite the reduction in the prime lending rate being lower than expected, the rate relief had an immediate positive impact on the group’s sales, with the monthly average gross sales rate increasing by approximately 30% since the start of the rate cutting cycle,” the group said.

Balwin reported a 6% decline in revenue to R2.2bn, while profit for the year increased by 8% to R234m. Headline earnings per share (HEPS) declined 4% to 45.95c, while net asset value per share rose 6% to 910.20c.

The group’s gross profit margin improved to 30% from 28% in 2024, largely driven by strong performance from its Balwin Annuity businesses. The margin from apartment sales remained steady at 24%, reflecting market pressures, while Balwin Annuity contributed R171.7m to gross profit.

“Operating expenditure was tightly managed and remained flat compared to the prior year at R350.9m. Operating costs at the company level decreased by 6%, driven by our continued focus on cost containment. However, Balwin Annuity saw a 14% increase in operating costs to R114.2m, reflecting increased activity and a 33% growth in revenue,” the group said.

Balwin wrapped up the year with a solid cash balance of R254.8m, comfortably above the board’s funding requirements. The group also kept its debt in check, with the loan-to-value ratio easing slightly to 40.4% below the industry average of 50%.

The Gauteng node re-emerged as Balwin’s largest revenue contributor, with 856 apartments recognised in revenue, up from 732 in 2024, increasing its share of total revenue to 49% from 39% the previous year, the group said.

Western Cape saw strong demand, with 99% of units recognised in revenue, supporting profitability. It contributed 801 apartments, holding a steady 46% share.

majavun@businesslive.co.za