Residential property developer RBA Holdings has significantly reduced its losses in the six months to June on the back of improved demand in the affordable housing market. The group reported an interim attributable loss of R2.3m compared to R10.3m in June last year. Revenue went up by 133% to R82.9m while gross profit went up from R14.4m to R32.9m.

“The improved gross profit can be attributed to increase in the profit realised through the stand component of our housing packages,” said the group’s CEO, David Wentzel, when announcing the six months results ended in June.

He said RBA, a developer of affordable houses in Gauteng, Polokwane and KwaZulu-Natal, historically relied on stand allocations from external developers and since listing in 2007, RBA started to develop its own land with improved margins available to the group.

Wentzel said market conditions remain difficult for the residential property development industry in general. “The supply of bank home loans remains tight and household indebtedness is still at high levels. Demand for affordable housing, however, remains robust and indications are that this sector is showing strong signs of recovery,” he said.

The group’s operating expenses from property development activities increased marginally by 3% against the prior comparative period, mainly attributable to increased marketing spend and inflationary pressures during the period. “RBA is showing that development in the affordable space (anything below R500 000) remains the mainstay of the property market,” said Leapfrog property managing director Kura Chihota.

He said with affordability being a big question mark for more expensive properties, buyers were now choosing more affordable units. Chihota said RBA, in comparison with its competitors, had managed its expenses to offer growth as property demand picks up. “While the average house pricing is doing 5% growth per annum, the affordable sector is doing 15% to 20%. Across the market, 53% of the buyers are blacks,” he said. As at June 30 RBA had 431 approved sales compared to 469 last year that were awaiting registration at the deeds office.

Wentzel said the group’s rental portfolio, consisting of 176 sectional title units in Protea Glen, Soweto, remains well managed. Construction on the next rental project consisting of 152 units will commence in October 2011.

Looking ahead, Wentzel said the financial recovery of the group was under way and the directors anticipated a further improved second half of 2011. He said improved screening of clients’ applications before submission to the banks had resulted in improved strike rates of approved home loans. “Indications are that the appetite of banks towards lending in the affordable housing sector will continue to improve,” he said.

He said the cash flow position of the group remains under pressure but is gradually improving as the group’s pipeline of approved sales is unwound. The group said its medium- to long-term prospects remain positive due to the historic shortage of housing in South Africa. It said it had the land, sales, administration and production capacity to meet forecasted demand while the recent economic events reduced competition in the affordable housing market.