SA home building activity improves 22 November 2011
Building activity in the South African housing market showed
The real value of new residential buildings reported as
some improvement in the third quarter of the year compared
completed in the first nine months of the year was down by 4
to the same period in 2010.
percent y/y to R10 43 billion which was R430 million less
The real value of new residential buildings reported as
than the total value of R10 86 billion in January to September
completed in the first nine months of the year was down by 4
2010.
percent y/y to R10 43 billion which was R430 million less
Absa Home Loans property analyst, Jacques du Toit says
than the total value of R10 86 billion in January to September
these real values are calculated at constant 2005 prices.
2010, according to Absa. According to the Absa Residential Building Statistics report, the planning and construction phases of new housing in Q3 2011 compared to Q3 2010, showed improvement.
He explains that in the number of housing units for which
The report revealed that the real value of plans approved for
year (12 970 in the second quarter).
new residential buildings was up by 2.2 percent year-on-year
In the first nine months of 2011, the volume of plans
(y/y) to R14 338 billion from January to September 2011, an
approved for new housing was 9.2 percent y/y or 3 443 units
increase of R307 million from R14 031 billion in the same
higher than in January to September 2010.
period last year.
“This improvement was driven by the segment for smaller
plans were approved by local authorities, volumes were up by 8.3 percent y/y to 14 891 units in the third quarter this
houses and the category higher-density flats and townhouses,� says Du Toit. The number of new housing units reported as completed was up by 6.9 percent y/y in Q3 2011 to a total of 10 952 units compared with 9 662 units constructed in Q2 2011. In the first nine months of the year, the volume of new housing units built was 4.1 percent y/y or 1 186 units higher at a total of 30 145. The uptick in new housing construction over this period was largely driven by the category for small housing, which showed growth of almost 14 percent y/y, he says. He says the focus of the future demand for and supply of new housing is expected to be on the segments of smaller-sized
houses
and
higher-
density flats and townhouses. The FNB Residential Building Activity
The homes completed showed a y/y growth of +6.9 percent
Loos says this means that the cumulative decline in completions in commercial building activity has been nothing short of spectacular, good news for a market needing to return to balance but bad news for the property development sector.
in Q3 2011 from 0.8 percent in Q2 2011.
From a mid-2007 peak level, industrial property building
FNB Home Loans property strategist John Loos says the
space completed was -181.7 percent lower for the 6 months
level of building completions remains slow. At 1.263 million
to September 2011, retail space completed -152.9 percent
square metres completed for the 3rd quarter, the level of
down from its 2008 peak, and office space -181.7 percent
completion remains at 46.7 percent of the peak level reached
down on its own 2008 peak.
in the final quarter of 2005.
Square metreage of retail space planned rose y/y +32.2
Activity also remains well below the long term trend level
percent in Q3 2011, industrial and warehouse space by
since 1994, as the correction, in response to an oversupplied
+22.3 percent and office space planned by +15.8 percent.
Q3 2011 revealed that building completions have seen mild positive y/y growth.
existing home market, continues, he says. He explains that there is currently a strong demand for housing in the affordable segment and the building sector is responding to this demand trend. In Q3 2011, completions in houses smaller than 80 square metres grew by 26 percent y/y and 32.7 percent in square metres. A major constraint on building activity remains the significant replacement cost gap. According to FNB’s valuers, the aggregate estimated residential replacement cost gap in the third quarter widened from the previous quarter’s 22.9 percent to 25.1 percent, the widest that this gap has been since the Q3 2003. Loos says the third quarter proved to be a mild improvement in terms of the growth in building completions. However, the volatile nature of building plans passed provides no clear indication on whether this improving trend will be sustained. “We are of the opinion that this trend will probably not yet prove to be sustainable, with a wide replacement cost gap set to continue to make life tough for the building sector to bring competitively-priced homes to the market.” He says the existing home market is well supplied and as a result its prices look set to remain under pressure in the near term with smaller homes being in more demand in the
FNB suggests that if commercial building activity is to see
residential market.
something of an overall pick-up in completions in the coming
Meanwhile, the commercial building sector experienced
quarters, it would probably be driven by industrial property
further weakening according to Statistics South Africa Q3
development and perhaps some retail building activity
2011 Building Statistics.
improvement on the back of recently strong retail sales.
All three major commercial building categories showed sharp
But office sector building activity is expected to remain the
declines in completions on a y/y basis.
weak link on the back of high national vacancy rates.
In terms of square metres completed, industrial space
– Denise Mhlanga
completed declined by -42.5 percent y/y, retail space by 42.2 percent y/y and office space by -26.1 percent y/y.