Home improvement to pip new build market?
South Africa’s home improvement market is catching up with its new build sector, and accounts for a third of the R39,2bn spent in the country’s three major provinces.
This is according to Stats SA building plans passed figures for 2014, which property economist and adviser to HomeTimes, Neville Berkowitz, has analysed.
In Gauteng, the Western Cape and KwaZulu-Natal, 28,560 people planned on building new homes, while 28,197 existing homeowners planned on adding to and improving on their existing homes.
The retail sector confirms consumers’ move to upgrade rather than to build new. Italtile CEO, Nick Booth, says municipalities’ slow rollout of bulk infrastructure negatively affected the new build market, with renovations showing better growth between 2014 and 2015. This was announced last week during the company’s results presentation, where he said depressed sentiment had hurt property-related investment – across all markets.
“At the top end of the income spectrum, customers adopted a selective ‘wait and see’ approach to property investment; in the middle-income market, consumers remained highly price sensitive and value conscious as they experienced intensifying pressure on disposable income,” he said. “Discretionary spend was allocated cautiously, after extensive research, on tried-and-tested high-profile brands.
“Customers with finite resources in the entry-level segment continued to invest small amounts in their homes, on an ongoing basis, and as and when funds were available. In rural and outlying areas their purchasing decisions demonstrated preference for ease of access to one-stop shopping offerings.”
Berkowitz’s research further reflects that the home alterations market is valued at R13,8bn in the three provinces.
The average size of a new home to be constructed in Gauteng was 157m2 at an average building cost of R6,100/m2 (new home average R958,500 in construction costs).
The average home alteration and addition was 89.4m2 at an average cost of R6,439/m2 (R575,500 upgrade cost).
The Western Cape saw smaller new homes built at an average of 122m2 at an average cost of R5,667/m2 (average construction spend of R692,500 for a new home).
The home improvement market saw 68m2 added to an existing home at a cost of R5,370/m2 (total add-on construction cost of R364,000).
KwaZulu-Natal bucked the three-province trend, with 57% of homeowners deciding to upgrade and 43% deciding to build new homes.
New homes averaged 159m2 at a construction cost of R7,200/m2 – 27% more expensive than homes in the Western Cape and 18% pricier than homes built in Gauteng.
The additions market averaged 86m2 per home at R7,492/m2 – the highest per square metre cost in the home improvement sector of the housing construction industry of the three provinces.
Ethekwini Municipality’s (Durban) homes averaged a construction cost of R9,571/m2 and the KwaDukuza Municipality (Stanger) R9,605/m2.
“These predominantly Indian areas of Durban and Stanger on the North Coast further validates our research of the Indian purchasing power equaling that of the whites by 2018,” says Berkowitz. “The decision to stay in one’s existing home and improve it by adding some 80m2 enables growing teenagers to be accommodated, as well as in other cases, ageing parents to live with their middle-aged children due to long waiting lists for affordable retirement homes and care facilities – so long in fact that people need to reserve their spaces while in their early 50s.”