Thursday, 18 May 2017 16:32

Subdued levels of residential building activity in the first quarter of 2017

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 Residential building activity remained under pressure in both the planning and construction phases of the South African market for new housing in the first quarter of 2017.

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The number of plans approved declined from a year ago whereas the number of housing units reported as completed showed single-digit growth. These developments are based on data published by Statistics South Africa in respect of building activity related to private sector-financed housing (see explanatory notes).  

The number of new residential building plans approved contracted by 4,0% year-on-year (y/y), or 542 plans, to 13 064 plans in the first quarter of the year from13 606 plans approved a year ago. This decline in plans approved was driven by the two categories of houses, which showed a combined contraction of 14,3% y/y, or 1 227 plans, to a total of 7 359 plans, whereas the segment for flats and townhouses recorded growth in plans approved of 13,7% y/y, or 688 plans, in the first quarter.  

Year-on-year growth in the number of new housing units built came to 9,4% y/y in the period January to March 2017. The segment for flats and townhouses showed strong growth of 29,2% y/y, or 1 023 units, with the volume of smaller-sized houses constructed, i.e. those with a building area of less than 80m², increasing by 9,4% y/y to 3 385 units over the 3-month period. The segment for houses equal to or larger than 80m² contracted by 16,6% y/y to 2 225 units.  

The real value of plans approved for new residential buildings declined by 7,9% y/y, or R928,94 million, to R10,78 billion in the first quarter of 2017, with the real value of new residential buildings reported as completed rising by 15,7% y/y, or R1,09 billion, to R8,02 billion in the quarter. These real values are calculated at constant 2015 prices.  

Levels of building activity with regard to additions and alterations to existing houses were also much subdued in the first quarter of the year, with the building area for which plans were approved contracting by 4,9% y/y and the building area reported as completed showing virtually unchanged from a year ago.    

The average cost of new housing built increased by 11,3% y/y to an average of R7 139 per square meter in the first quarter of the year compared with R6  415 per square meter a year ago. This was well above the average headline consumer price inflation rate of 6,3% y/y over the same period. The average level of and the increase in building cost per square meter with regard to the three categories of housing was as follows in January to March 2017: • Houses of <80m²: R4 979, up by 19,2% y/y • Houses of ≥80m²: R7 123, up by 10,0% y/y • Flats and townhouses: R8 023, up by 8,7% y/y  

With the South African economy forecast to grow by only 1,0% in 2017 and the household sector set to continue to experience a fair amount of financial strain this year, which will contribute to further low consumer confidence, residential building activity does not seem to show a significant improvement in the rest of the year.     

Last modified on Friday, 19 May 2017 16:40

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