The slowdown in residential building activity that commenced in May 2013 in the South African market for new housing continued up to August this year, after levels of activity have been on an upward trend in the first four months of the year. August saw negligible year-on-year growth with regard to the number of housing units for which building plans were approved by local government institutions, whereas the number of new housing units reported as completed dropped for the fourth consecutive month on a year-on-year basis in August.

On a cumulative basis, residential building activity still showed some growth in the first eight months of the year in terms of volumes as well as building area, with only the volume of housing units completed showing a small drop from the same period a year ago. The category for flats and townhouses remained the major contributor to growth in residential building activity up to August this year.

The number of new housing units for which building plans were approved increased by only 0,5% year-on-year (y/y) to a level of 4 613 units in August 2013, although there was an increase of 887 units in the planning phase from the July figure of 3 726 units. The higher number of plans approved in August compared with July was mainly driven by the segments of small houses and flats and townhouses.

The construction phase of new housing saw a significant drop of 23,4% y/y to 3 044 units in August, while this figure was also down by 551 units from July this year. The categories of small houses (-43,2% y/y) and flats townhouses (-11,8% y/y) mainly contributed to this contraction, whereas the number of houses completed larger than 80m² remained almost stable at 950 units in August from 947 units in July.

The first eight months of 2013 saw the real value of plans approved for new residential buildings growing by 17,3% y/y, or R3,23 billion, to R21,96 billion from R18,73 billion in the corresponding period last year. The real value of residential buildings reported as completed increased by 8,8% y/y, or R1,2 billion, to R14,84 billion in the period January to August from R13,65 billion in the same period last year. These real values of residential building activity are calculated at constant 2010 prices. 

The current declining trend in residential building activity is a reflection of conditions in the economy, household finances, consumer and building confidence and factors related to the demand for and supply of new housing. The expectation is that these factors will remain important, with residential building activity continued to be mainly focused on the segments of smaller-sized houses and higher-density flats and townhouses against the background of the affordability of housing and mortgage finance as well as changing lifestyles in general.