FNB/BER confidence index rises by 12 points in the 1st quarter of 2018

Posted On Tuesday, 20 March 2018 05:10 Published by
Rate this item
(0 votes)

Building confidence rises by 12 points in Q1

FNB_John_Loos

  • The FNB/BER Building Confidence Index rose to 43 in 1Q2018, from 31 in 4Q2017.
  • All but one out of the six sub-sectors registered higher confidence, namely quantity surveyors.
  • Higher activity, most notably among non-residential main contractors, and improved business conditions lifted confidence.
  • In sum, growth the building sector likely started the year off on a stable footing.

After falling to 31 in 4Q2017, the FNB/BER Building Confidence Index gained 12 points to register a level of 43 in 1Q2018. “Of importance was the broadbased nature of the improvement, with all of the sub-sectors barring quantity surveyors reporting higher confidence,” remarked John Loos, Property economist at FNB.

Despite the rise, at the current level, the index indicates that the majority (nearly 60 per cent) of respondents are dissatisfied with prevailing business conditions. 

Main contractor confidence gained 7 points to register a level of 41 in 1Q2018. The higher confidence was supported by an improvement in building activity, especially in the non-residential sector. According to Loos, “non-residential contractors have underperformed noticeably compared to residential contractors over the past few quarters, so this rebound is a positive surprise. However, it comes off a low base and the magnitude of the improvement will be difficult to sustain going forward given the economic fundamentals affecting the sector”. Residential activity was largely unchanged. Therefore, on balance, the survey points to somewhat better overall building activity.

The biggest increase in confidence (+29 index points) was among building material manufacturers. “While the higher confidence was supported by better domestic sales and production, it was the export indices – export sales and export order volumes – which provided the biggest lift,” added Loos. However, it is worth noting that the confidence of building material manufacturers is notoriously volatile.

Hardware retailer confidence moved higher for the third consecutive quarter to 47. This equates to a cumulative 34 index-point rise since 2Q2017. Sales volumes and orders continued to move higher. However, overall profitability remained relatively weak. “Along with the tangible improvement in sales and orders, hardware retailers also feel that business conditions are noticeably better than this time last year,” commented Loos.

“Confidence at the start of the building pipeline was a mixed bag, urging caution with regard to the outlook,” argued Loos. Architect confidence moved higher to 43 index points while the confidence of quantity surveyors shed 7 points to register a level of 31. A similar trend was observed with respect to activity where architects generally reported higher activity while quantity surveyor activity levels remained weak.

Sub-contractor confidence increased to 52 in 1Q2018, from 47 in 4Q2017. 

In conclusion: Building confidence started 2018 on a solid footing, rising to 43 in 1Q2018, from 31 in 4Q2017. The higher confidence is supported by the underlying activity indices with the sharp improvement in non-residential main contractor activity being the most encouraging. This, along with residential activity which was largely flat and higher sales for manufacturers and retailers, could see overall building sector output improve in 1Q2018. 

Regarding the outlook, Loos warned that: “It is uncertain what has lifted nonresidential activity so significantly this quarter, therefore it should be interpreted with caution. The building pipeline has not improved and general economic conditions continue to point to lacklustre (albeit higher than in the recent past) GDP growth. This is important as the non-residential sector typically lags growth in other sectors”.

Last modified on Tuesday, 17 April 2018 14:36

Most Popular

Balwin's Munyaka registers record R850 million in opening weekend sales, selling 555 apartments

Mar 09, 2020
Steve_Brookes_Balwin_Properties
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Balwin Properties and ABSA launch South Africa’s first green home loan

Mar 13, 2020
Apartment 71933
JSE-listed Balwin Properties Limited (Balwin Properties or the Company) and Absa Group…

Growthpoint reports a steady first half with its growth strategies paying dividends

Mar 11, 2020
Growthpoint Properties Group CEO Norbert Sassee
Growthpoint Properties (JSE: GRT) reported distributable income growth of 2.2% to R3.2bn,…

Spear REIT launches innovative self-isolation campaign for returning travellers in Cape Town, South Africa to combat COVID-19:

Mar 18, 2020
Double Tree Op
JSE listed Spear REIT Limited, the owner of the Double Tree by Hilton Cape Town, is the…

Precautions, planning and preparation - the real estate agent's guide to weathering the Covid19 storm

Mar 16, 2020
Corona
With the Corona Virus now in SA and beginning to cause widespread panic, we are not only…

Please publish modules in offcanvas position.