News Research

Architects and quantity surveyors remain upbeat about building activity for the remainder of 2024

Underpinning a better business mood, signs of increased activity and sales are evident across the building value chain with the production of building materials also showing improvement.

According to Siphamandla Mkwanazi, Senior Economist at FNB, main contractor confidence during Q2 2024 showed a mismatch between survey results and official data. “The latest Statistics South Africa data paints a dismal picture of the building sector, with the real value of investment in building construction down 15.4% on an annual basis in Q1 2024, from a 16% contraction in Q4 2023. The survey results are less downbeat. Nonetheless, it is likely that building investment declined by less in Q2 2024.”

A stark gap between the performance of residential and commercial contractors was evident during the quarter. While sentiment rose for both, the activity of residential contractors fared much worse than their commercial counterparts, although growth is in line with its long-term average. Mkhwanazi says this divergence is expected given how the respective property sectors are performing which is usually a precursor to building demand.

The residential property sector is still characterised by low demand and consequently very subdued house price growth. In contrast, office vacancy rates are gradually declining while the slowdown in the industrial property sector has stabilised,” he notes.

Encouragingly, the building pipeline improved as measured by architect activity – against expectations. Both architects and quantity surveyors are upbeat about Q3 2024, even though activity somewhat worsened in Q2 2024. Those surveyed noted a hesitancy by clients to commit to work until there is greater political certainty.

The main lift to the overall index during Q2 2024 came from hardware retailers, rising to its highest sentiment level since Q3 2022.

It is difficult to consolidate this result with the broader economic environment which has not improved materially since the last survey round. The rebound in sales this quarter could be due to a combination of base effects – the hardware sector has fared dismally over the last few quarters – but also potentially some rebuilding work following storm and wind damage in the Western Cape last quarter. Importantly, the better activity among main contractors could also have contributed to higher retail sales”, notes Mkhwanazi.