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Low single-digit growth in residential building activity up to late 2015 – Absa

Building activity with regard to new private sector-financed housing in South Africa recorded relatively low single-digit growth in the first eleven months of 2015 compared with the corresponding period in 2014, based on data published by Statistics South Africa. This is according to Absa Home Loans property analyst Jacques du Toit.

The number of new housing units for which building plans were approved increased by 4% year-on-year (y/y) to a total of just more than 55 600 in the eleven months to November last year. This growth performance was largely driven by the segment for houses less than 80m², which recorded growth of almost 13% y/y over this period, whereas the segments of houses larger than 80m² and flats and townhouses experienced some marginal contractions up to November.

The number of new housing units constructed increased by 5,2% y/y from January to November last year, with a total of more than 36 300 units built over the 11-month period.

This growth was the result of an improvement of 7,9% y/y, or 1 879 units, in new houses constructed of smaller and larger than 80m² to a combined total of 25 797 units compared with 23 918 house built in the corresponding 11-month period of 2014. The number of new flats and townhouses built was marginally lower by 0,7% y/y in January to November.

The average cost of new housing built increased by 6% y/y to an average of R6 148 per square metre in the eleven months to November. Building costs per square metre were as follows in the various segments of housing in January to November last year:

• Houses of <80m²: R3 912, up by 9,1% y/y.

• Houses of ≥80m²: R6 352, up by 3,9% y/y.

• Flats and townhouses: R7 111, up by 10,2% y/y.

The economy is forecast to show relatively low growth of about 1% in 2016, with inflation and interest rates expected to rise during the course of the year. Against this background the household sector is forecast to experience increased financial pressure, which will weigh on consumer and building confidence. These factors will be the main driving factors of the demand for and the supply of new housing this year, with residential building activity not expected to show a significant improvement from current levels over the next 12 months.



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