Balwin, a specialist developer of large-scale residential estates, has pointed to a change in property buying trends over the past year in South Africa, due to adverse market conditions created by the challenging macro-economic environment.
The JSE-listed company said that demand for three-bedroom apartments slowed over the past year while demand for one-bedroom apartments increased, impacting the group’s target market.
This contributed towards a 9% drop in revenue for the year ended February 2018, to R2.5 billion.
The decline, it said, was largely due to the delays in obtaining town planning and local authority approval for certain developments. “The average selling price per apartment was in line with the prior year, highlighting the impact of the tough macro-economic conditions on Balwin’s target consumer market,” it said.
“These approval delays impact the initial phases of a development. The majority of the delays pertain to the zoning of land. In order to address the delays in obtaining approval, management is placing an increased focus on acquiring zoned land as part of its land acquisition strategy,” Balwin said.
Earnings per share and headline earnings per share declined by 26% to 104 cents (2017: 140 cents) for the period.
Balwin said it launched five new developments during the period including Ballito Hills, its maiden development in KwaZulu-Natal and The Blyde, the first development in Southern Africa to feature a Crystal Lagoon.
The group said that the average selling price ranged from R720,000 (1 bedroom) to R1,347,000 (3 bedroom) for its classic apartments. Delays in obtaining town planning and local authority approvals for the new developments however impacted 696 apartments with handovers ending the year at 2,084 apartments, compared to 2,711 in the prior period.
Balwin said it has a secure pipeline of 39,951 apartments across 25 locations, with a 14-year development horizon.
Steve Brookes, CEO and founder of Balwin said: “We are disappointed by this period’s performance which was largely impacted by the delays in construction. We saw strong demand for our apartments, especially at the new developments.
“Had the delays not been experienced, we would have handed over close to 2,800 apartments which is at the upper end of our annual target.
To address the change in demand towards fewer bedroomed apartments, Balwin said it has adapted the apartment block configuration of developments to include a newly designed one bedroom apartment with the selling price starting at R599,900.
“This results in more one and two bedroom apartments per block, more apartment types to choose from and lower entry price points. Since introducing this new design we have seen a positive response from the market, said Brookes.
In 2017, Balwin established a subsidiary company, Balwin Fibre. “All future developments will have fibre and solar energy as a standard offering,” Brookes said.