Residential building activity strong growth in the first five months

Posted On Sunday, 20 July 2014 10:18 Published by
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The planning phase of residential building activity in the South African market for new housing, as reflected by the number of building plans approved by local government authorities, recorded relatively strong growth in the first five months of 2014 April 2014 compared with the corresponding period last year.

Residential Building Stats

However, the construction phase, i.e. housing reported as completed, lagged the planning phase by a fair margin in the period January to May this year. These trends in private sector-financed residential building activity are based on data published by Statistics South Africa.

The number of new housing units for which building plans were approved by local government institutions was significantly higher by 2 319 units to 6 763 units in May from 4 444 units in April, with seasonal factors probably having negatively affected the level of planning activity in April.

Building plans for a total of 4 748 units were approved in May 2013, which were 2 015 units less than in May 2014. The May figure was 42,8% higher compared with a year ago. More normalised demand and supply conditions are most likely responsible for the relatively strong performance recorded in the planning phase in the first five months of the year compared with a year ago, which should be reflected in the construction phase in due course.

A contraction in building activity with regard to the construction phase of new housing, i.e. the number of new units reported as completed, was evident in the five months up to May this year, largely driven by the category of houses, whereas the flats and townhouse segment posted low year-on-year growth of less than 1,5%. May this year saw the construction phase contracting by 15,4% y/y to a level of 2 629 units from 3 106 units built in May last year.

The average building cost of new housing constructed averaged R5 638 per square metre in the first five months of 2014, which came to an increase of 14,9% y/y from R4 909 per square metre in the corresponding period last year. Building costs are affected by factors such as building material costs, labour costs, transport costs, equipment costs, land values, rezoning costs, and developer and contractor holding costs and profit margins.

At a geographical level, the provinces of Gauteng, the Western Cape and KwaZulu-Natal continue to dominate residential building activity, with the major metropolitan municipalities of Cape Town, Nelson Mandela Bay, Buffalo City, Ethekwini, Johannesburg, Tshwane and Ekurhuleni having the largest share in aggregate residential building activity.

Building activity is continued to be driven by economic, household finance, consumer and building confidence factors, with activity set to remain relatively subdued compared with previous years in view of trends and prospects regarding these factors.

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