The planning phase of residential building activity improved in the first half of 2018, but the construction phase contracted sharply

Posted On Friday, 17 August 2018 20:40 Published by
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The planning phase of residential building activity improved in the first half of 2018, but the construction phase contracted sharply.

 

The diverging trends in building activity with regard to new private sector-financed housing (see explanatory note) in South Africa continued up to mid-2018. The planning phase (building plans approved by local government institutions) improved on a year-on-year basis in the first half of the year, whereas the level of activity in the construction phase (housing units reported as completed) showed a substantial contraction compared with the first six months of last year. The number of building plans approved for new housing increased by 9,3% year-on-year (y/y), or a total of 2 539 plans, to 29 866 plans in January to June this year, with this growth driven by the segment of flats and townhouses, which showed growth of 27,2% y/y in the 6-month period. 

The volume of new housing units reported as being completed contracted by 22,7% y/y, or 4 597 units, to a total of 15 612 units in the first six months of the year. All segments of housing contributed to the decline in new housing units built in January to June, with the main drivers of this decline the segments of houses smaller than 80m² and flats and townhouses. The real value of residential building plans approved increased by 4,7% y/y to a level of R23,55 billion in the six months up to June this year, with the real value of residential buildings reported as being completed contracting by 15,2% y/y to R14,36 billion over this period. These real values were calculated at constant 2015 prices.   The average building cost of new housing completed increased by 5,5% y/y to R7 362 per square meter in the first half of 2018, compared with R6 979 per square meter in the corresponding period last year. Residential building costs were up by a 1,2% y/y in real terms, i.e. after adjustment for the effect of inflation, in the 6-month period up to June, based on an average headline consumer price inflation rate of 4,3% y/y over this period. 

Building activity with regard to alterations and additions to existing houses remained under downward pressure, with both the building area approved and the building area reported as completed contracting on a year-on-year basis in January to June. The building cost of completed alterations and additions to existing houses showed strong growth for the fourth consecutive quarter, rising by 17,3% y/y to R7 323 per square meter in the second quarter of the year, compared with R6 245 per square meter a year ago. In real terms, i.e. after taking account of inflation, building costs of completed alterations and additions with regard to existing houses increased by 12,5% y/y in the second quarter.  The economy, household finances, confidence levels and property market sentiment in general will remain the major driving factors of residential building activity, which is over the short to medium term expected to stay much in line with trends of the past few years.   

The average building cost per square meter in the three categories of new housing was as follows in January to June 2018:
• Houses of <80m²: R5 655, up by 22,2% y/y.
• Houses of ≥80m²: R7 319, up by 3,1% y/y.
• Flats and townhouses: R7 963, down by 1,2% y/y

Last modified on Monday, 20 August 2018 02:25

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