Construction activity in the residential and nonresidential propertysector fell in April as the effect of interest rate cuts dimmed, but thesector remained buoyant, Statistics SA (Stats SA) figures say.

The value of approved and completed building plans declined month onmonth in April, mainly due to technical factors and a slowdown in the constructionof nonresidential buildings.

However, on an annual basis, construction activity expanded at a rapidpace, reflecting buoyant conditions in the property market.

Interest rate cuts totalling 5,5 percentage points last year fuelleda property market boom, with house prices soaring to a 20-year high lastmonth, according to Absa's latest housing price index.

Stats SA's figures, released on Tuesday, confirmed that constructionactivity was expanding rapidly compared with a year ago, but there weresigns this was tapering off.

The figures showed that the total value of building plans passed fell11,7% month on month in April to R2,168bn, while the value of buildingscompleted during the month was 2,5% lower (adjusted for seasonal factorsand inflation).

Efficient Group economist Nico Kelder said yesterday that the figuressuggested the effect of lower interest rates on the property sector wasslowing. "Generally, it appears as if the building industry is nearingthe stage where the full impact of lower interest rates is discounted.

"Put differently, lower interest rates were the main driving force behinda surge in building activities. However, it appears as if the effect oflower rates is slowly losing force."

Despite a slowdown in the value of construction plans during the month,the sector remained buoyant, with the value of building plans approvedin the first four months of the year 25,2% higher at R8,315bn than in thecorresponding period last year, said Stats SA .

The largest increases over this period were in the value of buildingplans for houses, flats and townhouses, mainly in Western Cape and Gauteng.

According to Stats SA, areas in Western Cape reporting the most buildingactivity in the first four months of the year were Mossel Bay, Knysna andCape Town.

In Gauteng, the largest increase in the housing market was reportedin Johannesburg, followed by Mogale and Ekurhuleni.

The construction sector outperformed other sectors of the economy inthe first quarter, rising 6,6% in the latest gross domestic product figures(on a quarter-onquarter, seasonally adjusted and annualised basis).

Sentiment in the building sector was also at peak levels, suggestingthat production would continue to grow steadily this year, underpinningeconomic growth.

The latest business confidence index, compiled by the University ofStellenbosch's Bureau for Economic Research and sponsored by Rand MerchantBank, showed that confidence in the construction sector increased to 78points last quarter, from an already high level of 74 in the final quarterof last year.

However, with no prospect of interest rate cuts this year, growth inthe property sector was likely to stabilise. Reserve Bank governor TitoMboweni said last week there should be no expectation of rate cuts goingforward, as mounting inflation risks might threaten a breach of the inflationtarget later this year.

Business Day