The planning phase of new housing, reflected by the volume of building plans approved, contracted on a year-on-year basis up to September, whereas the number of new housing units completed showed very low single-digit growth over the 9-month period. These trends are based on data published by Statistics South Africa in respect of building activity related to private sector-financed housing (see explanatory notes).

The volume of new housing units for which building plans were approved, contracted by 10,7% year-on-year (y/y), or 4 905 units, to 41 139 units in the period January to September from a year ago. This decline in building plans approved was largely the result of a sharp drop of 26,5% in the planning of new houses of less than 80m². The substantially smaller number of plans approved for housing at the lower end of the market in the nine months up to September is concerning in view of the housing need and consequent demand in this segment of the market. The number of plans approved in the segment for houses larger than 80m² contracted by just more than 6% y/y in January to September, with the flat and townhouse segment showing low growth of 3,7% y/y over the same period. These trends in new-housing planning are indicative of prevailing economic conditions, the state household finances and levels of confidence.

Year-on-year growth in the number of new housing units built was relatively low at only 2,8% y/y in the 9-month period up September this year, with only the segment for flats and townhouses showing substantial growth of around 17% y/y over this period. The relatively strong year-on-year growth in flat and townhouse construction is related to the levels of activity in the planning phase over the past 2½ years, with a normally long lag between the planning phase and the eventual completion date as a result of the extent of these housing projects.

The real value of plans approved for new residential buildings declined by R983,6 million, or 2,6% y/y, to R36,98 billion in the first nine months of 2016, with the real value of new residential buildings reported as completed declining by R272,7 million, or 1,2% y/y, to R23,05 billion over the same period. These real values are calculated at constant 2015 prices.

The building area approved for alterations and editions to existing houses declined by almost 5% y/y in the period January to September this year, with the building area completed rising by a negligible 1,2% y/y over this period. These trends in the upgrading and extension of existing houses came against the background of financial pressure experienced by homeowners as well as continuous upward pressure on building costs.

The average cost of new housing built increased by 6,9% y/y to an average of R6 517 per square meter in the first nine months of the year compared with R6 094 per square meter in the corresponding period last year. The average building cost and the year-on-year percentage change per square meter in the three categories of housing were as follows in January to September 2016:

• Houses of <80m²: R4 343, up by 13,0% y/y

• Houses of ≥80m²: R6 581, up by 4,3% y/y

• Flats and townhouses: R7 574, up by 7,4% y/y

Against the background of trends in and the outlook for the economy, household finances and consumer and building confidence, residential building activity is set to remain largely subdued over the short to medium term.