Overall residential building activity remaining subdued up to late 2018

Private sector-financed building activity in the South African market for new housing remained subdued in the first eleven months of 2018, based on data released by Statistics South Africa.

 However, significant divergences remain evident at a segment level, with the category of higher-density housing, i.e. flats and townhouses, being a major focus of residential building activity. This trend is most probably related to the factors of changing trends over time regarding lifestyles, housing affordability and building costs.  

The number of building plans approved for new housing increased by 4,8% year-on-year (y/y), or a total of 2 497 plans, to 54 976 plans in January to November last year. Growth in plans approved was driven by the segment for flats and townhouses, which recorded relatively strong growth of 20,5% y/y, or 4 217 plans, to a total of 24 822 plans approved in this category of housing over the 11-month period. Plans approved with regard to the two categories of new houses contracted on a year-on-year basis over this period.  

The volume of new housing units reported as being completed increased by 2,3% y/y, or 3 553 units, to a total of 36 367 units in the first eleven months of last year. The segment of houses smaller than 80m² was a major factor in this subdued growth with a contraction of 20,9% y/y in the 11-month period last year, while the segment for flats and townhouses recorded growth of 27,7% y/y in the same period. 

The average building cost of new housing completed increased by 4,4% y/y to R7 472 per square meter in the first eleven months of 2018 from R7 155 per square meter in the same period in 2017. In the period of January to November last year residential building costs dropped by a real 0,2% y/y, based on an average headline consumer price inflation rate of 4,6% y/y over this period. The average building cost per square meter in the categories of new housing was as follows in January to November last year:

• Houses of <80m²: R5 774, up by 18,3% y/y.
• Houses of ≥80m²: R7 346, up by 2,6% y/y.
• Flats and townhouses: R7 977, down by 3,4% y/y.

Building activity with regard to alterations and additions to existing houses continued its downward trend up to November last year, with both the building area approved and the building area reported as completed showing a contraction on a year-on-year basis over the 11-month period. The building cost of completed alterations and additions to existing houses increased by 11,3% y/y to R7 245 per square meter in the 11-month period from R6 509 per square meter a year ago. In real terms, the average building cost of completed alterations and additions to existing houses increased by 6,4% y/y over this period.

In view of recent trends in and the outlook for the economy, household finances and consumer and  building confidence, residential building activity is expected to remain relatively subdued in 2019.