Residential unit completions growth is weak, with negative growth in plans passed

For the month of June, square metres’ worth of residential buildings completed rose by 12.4% year-on-year. This represents a strengthening from the prior months’ slower growth of +2.7%.

However, as monthly data is traditionally volatile, FNB prefers to analyse trends through smoothing the data with a 3-month moving average. Here, a more moderate growth rate of 2.06% year-on-year for the 3 months to June, up from a previous negative rate of -5.68% for the 3 months to May is seen.

The 3 month moving average for Square Metres of Residential Plans Passed has been recording decline to the tune of -3.23% for the 3 months to June.

A similar picture is witnessed when examining the number of residential units completed. Here, too, wan acceleration in the year-on-year growth rate from 3% year-on-year in the previous month to 10.9% in June is seen.

But smoothing using the 3 month moving average, FNB sees a smaller growth rate of 3.85% for the 3 months to June.

In short, since late-2015 the Residential Building Market remains weak and lacking in clear direction.

And so, residential building completions chug along at a level around half of what they were back at the height of the building boom. 1.353 million square metres of residential space were completed for the 3 months to June, compared to 2.706 million completed for the 3 months to December 2005.

While the currently moderate level of building activity is not great news for the Development Sector, it remains crucial to maintaining a reasonable balance between demand and supply in the Residential Market at a time when the economy teeters on the brink of recession.


South Africa has had 4-and-a-half years of broad economic growth stagnation and 2-and-a-half-years of mild interest rate hiking. Building activity growth has more or less responded to the economic deterioration, hovering not far from zero in response to these economic forces when one smooths out the monthly data volatility.

Given that economic growth teeters on the brink of recession, and Consumer Confidence remains very weak, we would expect the stagnant growth in residential completions to continue through the 2nd half of 2016.

It is expected to see relative strength in the Flats and Townhouses category of building, which would mean a shift towards a smaller average size of home built, which would better reflect the financially constrained Household Sector.

Read more here: Property_Barometer_ June_Residential_Building_Stats_Aug_2016