Building activities on a roll

Posted On Monday, 14 February 2005 02:00 Published by eProp Commercial Property News
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THE Stellenbosch-based Bureau for Economic Research (BER) reports in its latest survey on the building industry that tender prices are rising above-inflation percentages and also by more than builders’ input.

Construction IndustryTHE Stellenbosch-based Bureau for Economic Research (BER) reports in its latest survey on the building industry that tender prices are rising above-inflation percentages and also by more than builders’ input.

The annual rate of increase was 14.1% in the second quarter of 2004, 12% in the third quarter and 13.5% in the fourth. The BER says this is a clear indication that building contractors are widening their profit margins during the current building revival.

This is underscored by BER survey data that indicate that business confidence levels are improving yet further, that competition in tendering is easing and that shortages of labour and materials are getting worse.

As at is, business confidence in the industry has now reached levels last seen during the economic upswing of 1978/81.

The BER warns though that the increased material shortages and wide spread scarcity of skilled labour could in time seriously impair the longevity of the current expansion in the building cycle.

Building activity in the residential sector remains very positive and the business confidence of contractors firmed further. No less than 96% of respondents polled were satisfied with the current business conditions.

Building conditions in the non-residential sector have shown a substantial improvement and indications are that the demand for non-residential work is now recovering over a broad front.

This may be good news for builders, but property developers are uneasy. Greg Deans, managing director of Century City Property Developments says the company’s biggest challenges over the next 12 to 18 months are going to be delivery issues as supply industries and contractors are already stretched to hilt which put upwards pressure in building costs and makes it increasingly difficult to deliver projects timeously.

The BER says it expects building costs to keep on rising and it forecasts that the rate of increase in 2005 will be 12%, substantially higher than the inflation rate.

The cost of materials too are mostly cause for concern. Over the past year the price of diesel increased 36%, reinforcing steel climbed by more than 29% and there was an exorbitant 55% increase in unworked structural steel prices.

Other suppliers raised their prices more moderately. Stainless steel product prices rose only 0.5%, timber 5.8% and aluminium 6%. By contrast, the manufacturers of certain building materials are passing on the benefits of the strong rand exchange rate. Examples are glass, the price of which declined by 4.3%, civil engineering plant (-3.9%) and bearings (-l.2%).

Last modified on Saturday, 19 October 2013 15:39

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