Continued diverging trends in residential building activity

Private sector-financed building activity in the South African market for new housing showed continued diverging trends on specifically a segment level in the first eight months of 2018, which caused the planning phase of new housing to have improved whereas the construction phase has contracted over this period.

The number of building plans approved for new housing increased by 11% year-on-year to 41 480 plans in January to August this year, with this growth the result of strong growth of 29,5% year-on-year in the segment of flats and townhouses. The number of new housing units reported as being completed was down by 8% year-on-year to a total of 23 859 units in the first eight months of the year. The segment of houses smaller than 80m² was the main driver of this decline, recording a drop of 31,2% year-on-year in the eight-month period.

The average building cost of new housing completed increased by 5,4% year-on-year to R7 435 per square meter in the first eight months of the year from R7 052 per square meter in the same period last year. In the period of January to August residential building costs increased by a real 0,8% year-on-year, based on an average headline consumer price inflation rate of 4,5% year-on-year over this period.

Residential building activity is expected to remain relatively subdued in the rest of 2018 in view of a poorly performing economy, continued financial strain experienced by the household sector and a low level of building confidence in the first three quarters of the year.

Read more here: Absa Building Stats August 2018