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Early 2016: Divergent trends in growth in residential building activity

The level of residential building activity in the planning phase of the South African market for new housing recorded a double-digit year-on-year contraction in January 2016, whereas growth in the construction phase was driven by a significant improvement in one segment of the market, Absa Home Loans property analyst Jacques du Toit found. These trends are based on data published by Statistics South Africa in respect of building activity related to private sector-financed housing.

The number of new housing units for which building plans were approved was down by 13,6% year-on-year (y/y), or 574 units, in January from a year ago. Year-on-year contractions occurred in both the volume and square metres across all three categories of new housing planned in the first month of the year.

In the construction phase the volume of new housing units built increased by 22,7% y/y, or 505 units, in January compared with the corresponding month last year. This growth, however, was largely the result of strong growth in the segment for flats and townhouses, whereas growth in the two categories of houses came to a combined 7,1% y/y, or 117 units in January.

The real value of plans approved for new residential buildings dropped by 19,9% y/y or R528m, to R2,12bn in January from R2,65bn in January last year. The real value of buildings reported as completed was up by 17,6% y/y, or R254m, to R1,7bn in January from R1,44bn in January 2015. These real values are calculated at constant 2010 prices.

The average building cost of new housing constructed came to R6 814 per square metre in January this year, which was 13,1% higher than the cost of R6 025 per square metre a year ago. The building cost per square metre in the three categories of housing was as follows in January 2016:

  • Houses of <80sq m: R3 873
  • Houses of >80sq m: R6 617
  • Flats and townhouses: R8 604

In view of trends in and the outlook for the economy and household finances, residential building activity is expected to remain relatively subdued in 2016, with the level of building confidence that was still on a downward trend in the first quarter of the year and levels of alterations and additions to existing houses also under pressure in the first month of the year.

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