Confidence up in building industry

Posted On Tuesday, 13 July 2004 02:00 Published by eProp Commercial Property News
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Demand driving residential sector

Construction IndustryBUSINESS confidence in the building sector increased slightly last quarter, boosted by strong growth in the residential property market and rising activity in the nonresidential market.

The business confidence index, compiled by the University of Stellenbosch's Bureau for Economic Research, climbed to 69 points last quarter from 67 in the first quarter.

Building costs increased 6% last quarter.

This was the highest confidence index recorded in the building sector since the early 1980s, senior bureau economist Charles Martin said yesterday.

Sentiment was strongest in the residential building sector, with 90% of respondents satisfied with current business conditions, according to the bureau's survey.

Respondents in the residential building industry also indicated an increase in employment levels in the sector, while expecting the current favourable business conditions to continue this quarter.

Last year's cumulative rate cuts of 5,5 percentage points fuelled a boom in the local housing market, with house price inflation soaring to a 21-year high, according to Absa's latest house price index.

With interest rates likely to remain steady this year, positive growth in the building industry would continue over the next 12 to 18 months, said Martin.

Building activity in the nonresidential market such as offices, shopping malls and factories was also starting to pick up, after steady growth in the retail and manufacturing sectors this year.

"The situation in the nonresidential property market is turning around.

Retail sales are doing very well, and the manufacturing sector is now out of recession.

"We are starting to see more (property) development in these sectors," said Martin.

However, business conditions in the civil engineering sector remained weak, mainly due to a lack of large government contracts and poor profitability in the mining sector sparked by the strong rand.

"The strong rand is having an adverse effect on the mining sector, while major government construction projects are slow to get off the ground," said Martin.

"Overall, the civil engineering sector is not performing as well, and firms expect only a mild improvement in business conditions this quarter," he said.

Martin said the business confidence survey was biased towards large civil engineering companies and would not necessarily incorporate activity in the smaller building contractors.

The bureau's survey typically leads building sector figures from Statistics SA (Stats SA) by six months, said Martins, which implied that official figures would continue to show strong positive growth for the rest of the year.

Stats SA is set to release tomorrow figures of building plans approved and completed in May.

Stats SA's April figures suggested that construction in the residential and nonresidential property market slowed during the month, but remained fairly high on a year-on-year basis.

Martin said with interest rates remaining flat or even increasing next year, the strong growth rates recorded in the building sector would start tapering off, but remain positive. "There is still steam in this sector," he said.



Source: Business Day

Last modified on Monday, 21 October 2013 20:07

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