Pumping out apartments

Residential property development is a sector that should offer enormous potential to operations that have the skills to provide a product the punters want at a price they can afford. There’s clearly no shortage of demand, particularly in the lower price brackets. This is where Balwin is focusing, with the bulk of its development pipeline in the sweet spot of R600,000 to R2m. This amount gets you a one- to three-bedroom apartment in a secure development, with plenty of extras on tap.

The group is pumping out between 2,000 and 3,500 apartments a year, with the potential to increase capacity to 5,000 a year as and when it thinks it can get them off the books. It is also undertaking more upmarket developments, up to selling prices of R3m, as well as rent-to-buy developments in partnership with property funds, and is looking to exploit opportunities for annuity income from services it can provide within its developments.

There’s a ton of opportunity, but it’s a competitive market and cash flow is always a concern.

Scale is of key importance, and Balwin emphasises the benefits of keeping to a standard specification, which allows it to rotate its teams of artisans among estates depending on the developmental stages of the various sites. Development risk is mitigated through building and marketing estates in phases, with construction undertaken against pre-sales wherever possible. The share price has drooped dramatically since the listing in 2015, yet Balwin is still making money in tough conditions and could be geared towards taking off dramatically if the macro-environment ever perks up.

Balwin could be geared towards taking off dramatically if the macroenvironment ever perks up