Friday, 18 August 2017 10:08

Contraction in residential building activity in the first half of 2017

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Levels of building activity in the South African market for new private sector-financed housing (see explanatory notes) contracted on a year-on-year basis in both the planning and construction phases in the first half of 2017, based on data released by Statistics South Africa.  

The number of building plans approved for new housing declined by 4,6% year-on-year (y/y), or 1 298, to 27 224 in January to June this year. Although plans approved for new houses smaller than 80m² increased by 9,2% y/y in the 6-month period, plans approved for houses equal to or larger than 80m² and flats and townhouses dropped by 9,4% y/y and 12,2% y/y respectively over this period. The total number of plans approved in respect of new housing since the start of 1994 came to 1 708 590, of which 42,8% were for houses less than 80m², 29,9% for houses equal to or larger than 80m² and 27,3% for flats and townhouses.    

The volume of new housing units reported as being completed was down by 0,5% y/y in January to June this year, with the segment for houses of 80m² and larger showing a relatively sharp drop of 21,4% y/y, or 1 308 units, to 4 800 units over this period. The total number of new housing units built since the start of 1994 came to 1 265 225, of which 46,1% were houses less than 80m², 26,9% were houses equal to or larger than 80m² and 27,0% were flats and townhouses.  

In view of financial strain experienced by many homeowners, alterations and additions to existing houses were also constrained in the first six months of 2017, with the total building area for which plans were approved rising by a benign 1,1% y/y and the total building area completed contracting by 10% y/y in January to June.   

The average building cost of new housing increased by 8,6% y/y to an average of R6 967 per square meter in the first six months of the year compared with R6 417 per square meter in the corresponding period last year. Consumer price inflation averaged 5,8% y/y in January to June this year.

The average building cost per square meter in the three categories of new housing was as follows in the 6-month period up to June:

• Houses of <80m²: R4 626, up by 11,3% y/y

• Houses of ≥80m²: R7 104, up by 9,4% y/y

• Flats and townhouses: R7 997, up by 7,2% y/y  

Residential building activity is projected to remain under pressure in the rest of 2017.

This will be the result of trends in and the outlook for the economy (real gross domestic product dropped by 0,7% quarter-on-quarter (q/q) in the first quarter of the year, with full-year growth forecast at 0,3%), household finances (real disposable income and consumption expenditure contracted by 1,6% q/q and 2,3% q/q respectively in the first quarter), consumer confidence (-7 index points in the first half of the year) and building confidence (in the second quarter of the year at its lowest level since the fourth quarter of 2012). 

Last modified on Friday, 18 August 2017 10:25

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