Continued subdued residential building activity up to late 2016

Building activity with regard to new private sector-financed housing in South Africa remained much subdued in the first eleven months of 2016 compared with the corresponding period in 2015, based on data published by Statistics South Africa.

 The number of new housing units for which building plans were approved, was down by 8,5% year-on-year (y/y), or 4 756 units, to 51 137 units in the period January to November last year from the same period a year ago. The drop in building plans approved in the 11month period was mainly the result of a decline of 25,5%, or 5 514 units, in the planning of new houses of less than 80m². Plans approved for houses larger than 80m² contracted by 6,7% y/y, or 1 062 units, in January to November, whereas the flat and townhouse segment recorded growth of 9,9% y/y, or 1 820 units, over the same period.  

The volume of new housing units built showed relatively low growth of only 1,1% y/y in the 11-month period up November last year, with only the segment for flats and townhouses registering some noticeable growth of 9,5% y/y, or about 1 000 units, over this period. The two segments of houses, however, both contracted on a year-on-year basis in terms of the number of units built up to November.  

The real value of plans approved for new residential buildings declined by R286,7 million, or 0,6% y/y, to R46,43 billion in the first eleven months of 2016, with the real value of new residential buildings reported as completed declining by R695,3 million, or 2,4% y/y, to R28,70 billion over the same period. These real values are calculated at constant 2015 prices.  

The average building cost of new housing constructed in January to November 2016 increased by 6,4% y/y to an average of R6 539 per square meter compared with R6 148 per square meter in the corresponding period of 2015. The average building cost and the year-on-year percentage change per square meter in the three categories of housing were as follows in January to November last year: • Houses of <80m²: R4 438, up by 13,6% y/y  • Houses of ≥80m²: R6 614, up by 4,1% y/y  • Flats and townhouses: R7 581, up by 6,7% y/y  

The economy is estimated to have grown by only 0,4% in 2016, with real growth of 1% forecast for 2017. Headline consumer price inflation is expected to subside to around 5% y/y by the end of the year from 6,8% y/y in December last year, with interest rates projected to remain stable at currently levels throughout the year. With both consumer and building confidence levels that were depressed in 2016, as well as trends in and the outlook for the economy and the household sector, residential building activity is to remain relatively subdued in the foreseeable future. www.eprop.co.za