Steady growth in planning phase of residential building activity

Posted On Friday, 21 November 2014 12:21 Published by
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Growth in the planning phase of residential building activity continues, but the construction phase contracts unabatedly.

Housing

The first nine months of 2014 saw continued year-on-year growth in 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.

However, the contraction in the construction phase of residential building activity, i.e. the volume of housing units reported as completed, continued unabatedly up to the end of the third quarter of the year. These trends in residential building activity are from data published by Statistics South Africa in respect of private sector-financed housing.

The number of new housing units for which building plans were approved, increased further in
September this year, by 12,8% year-on-year (y/y) to a cumulative total of 43 350 units in the
first nine months of the year. This resulted in growth of 13,4% y/y in the period January to
September.

The segments of smaller-sized houses (<80m²) housing and higher-density flats and townhouses, with a combined share of 70,3% of the total, remained the major contributors to the improved level of plans approved up to September.

The construction phase of new housing has contracted on a year-on-year basis for the sixth
consecutive month in September, by 6,2% in volume terms. However, the third quarter of the
year saw construction volumes increasing by 18,8% from the second quarter to a total of 9 569
units, with the continuous growth in the planning phase that could have played a significant
role in the strong quarter-on-quarter growth.

The real value of plans approved for new residential buildings increased by 10,3% y/y, or R2,54
billion to R27,09 billion in January to September from R24,55 billion in the corresponding period last year. The real value of residential buildings reported as completed was down by 4,7% y/y, or R793,2 million, to R16,17 billion in January to September from R16,97 billion in the same period last year. These real values are calculated at constant 2010 prices.

The average building cost of new housing constructed averaged R5 778 per square metre in the
period January to September this year, resulting in an increase of 13,2% y/y from R5 106 per
square metre in the same 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.

Building activity with regard to additions and alterations to existing houses showed a marginal
improvement in terms of building area in the first nine months of the year compared with the
corresponding period last year, whereas the total building area completed was down by almost
39% y/y over the same period.

This might be an indication of financial strain experienced by consumers, eventually leading to the maintenance of existing houses being neglected. Trends in residential building activity will continue to be driven by economic factors, household finances, the affordability of new housing and changing lifestyles, which will impacted the demand for and supply of new housing.

Last modified on Friday, 21 November 2014 18:05

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