The Western Cape has risen to the top in terms of total value of residential building plans passed and completed.
According to May 2022 data released by StatsSA, building plans passed in the Western Cape accounted for 34.13% of the national total, above Gauteng’s 29.8% and KZN’s 19.03%. Buildings completed painted a similar picture with the Western Cape claiming 40% of the national share in terms of value, Gauteng 31.3% and KZN 15.2%.
If the Western Cape maintains this strong building activity, 2022 will be the first year on record that the province boasts a bigger value of plans passed and completions than Gauteng (and every other province), says FNB, which would suggest something about its economic management and performance relative to other regions.
However, when reviewing Gauteng’s share drop since 2019, Property Sector Strategist, John Loos, says that potential data reporting issues mustn’t be ignored. Despite a bigger drop in values reported during 2020, which caused its first initial big share loss, Gauteng recorded a big recovery of 53% in value of plans passed, compared to the Western Cape’s 55.5% and 30.3% in completions, compared to the Western Cape’s 37%.
Where the Western Cape has seen year-on-year growth of 39.9% in the value of residential building plans passed to May 2022 (and +40.8% in residential completions), Gauteng saw a -23.4% decline in plans passed (and a -16,4% decline in completions) over the same period.
KZN, the third largest market, saw +16.5% growth in residential plans passed over the period, and a massive 101% in completions.
There may be a story to tell in this shift in relative share of the development market, away from Gauteng, says Loos.
“Firstly, the Western Cape has seen its share of the value of residential building activity broadly growing since near a decade ago, and its residential market has performed stronger than other major regions in the period following the 2008/9 Global Financial Crisis”.
“In addition, evidence has existed in the FNB Estate Agent Surveys of 2022 to date that the Western Cape market has had the strongest market activity in its overall residential market, and Gauteng the weakest, if estate agents’ perceptions are reasonably accurate”.
There has also been evidence in the post-lockdown period of strong net semigration of skilled middle-to-higher income households to the Western Cape, and net outflows away from Gauteng which has increasingly broadened outwards from Cape Town to the Southern Cape as well as up the West Coast, requiring significant new development activity in those regions.
The recent FNB Commercial Property Broker Survey also points to Gauteng markets being weaker than major coastal metro property markets (and Cape Town metro the strongest), which suggests that Gauteng, and especially Greater Johannesburg, may have a weaker economy of late than the main coastal regions.
“Relative sentiment towards these major regions, and resultant flows of skilled and middle-to-higher income people, may be altering the performance of the major economic regions in South Africa, in turn altering the sizes of their residential development markets”.
Gauteng will remain the largest economy in South Africa for many years to come but major coastal regions, especially the Western Cape, appear to be chipping away at the extent of its dominance slowly.
