Residential building sector stabilising

19 August 2011

The value of recorded building plans passed by larger municipalities increased by almost five percent from January to June 2011 compared with the same period last year, Statistics South Africa said on Thursday.

The value of building plans during the first six months of the year was R1.4-billion, Stats SA said in a report.

Allowing for the effects of inflation, the real value of recorded building plans passed by larger municipalities at constant 2005 prices increased by 0.6% during January to June 2011 compared to the same period in 2010, the agency said.

FNB Home Loans strategist John Loos said the statistics showed that on a year-on-year basis, the square metreage of residential buildings completed mildly declined by five percent in the second quarter of 2011.

“However, the more forward looking indicator, square metreage of building plans passed, showed mildly positive growth of 1.2% year-on-year over the same period,” he said in a statement.

The actual square metreage of buildings completed in the second quarter was 43% of the peak reached in the final quarter of 2006, which was then the height of the residential building boom, Loos said.

“The latest figures more-or-less fit in with our expectations – that the building sector should start stabilising at these levels, after a huge decline in activity in recent years.”

Loos expected the overall square metreage of residential building completed to return to low single-digit growth in the coming quarters, in lagged response to a very mild increase in residential demand, and in existing property prices after the 2008 recession.

“Growth is expected to be constrained to very mild levels by the strong supply of existing properties in the market, by new homes’ building costs still outstripping existing home values by a significant margin, and widespread financial pressure on the household sector,” he said.

“The limited expected growth is expected to be driven largely by the affordable segment of the market.”

Sapa