South African residential building activity improved in the first eight months of 2011 compared to a year ago according to the latest Absa report.
Absa says the real value of plans approved for new residential buildings was up by 3.9 percent y/y to R12.69 billion in the period January to August 2011 from R12.21 billion in the same period last year. The real value of new residential buildings reported as completed in the first eight months of the year was down by 8 percent y/y to R9 billion from R9.79 billion in 2010.
The Absa Home Loans Building Statistics report revealed that despite this improvement in building activity, over the short term the industry will experience levels of strain with volumes down in both the planning and construction phases in August from July 2011.
New housing construction increased by only 1.9 percent year-on-year (y/y) in the first eight months of the year.
Absa says the real value of plans approved for new residential buildings was up by 3.9 percent y/y to R12.69 billion in the period January to August 2011 from R12.21 billion in the same period last year.
The real value of new residential buildings reported as completed in the first eight months of the year was down by 8 percent y/y to R9 billion from R9.79 billion in 2010.
These real values are calculated at constant 2005 prices, according to the bank.
Writing in the report, Absa Home Loans property analyst, Jacques du Toit says as a result, the future focus of new housing demand and supply is expected to be on the segments of smaller-sized houses and higher-density flats and townhouses.
He says the building activity improvement was especially felt in terms of the planning of flats and townhouses.
The construction of new housing was marginally higher in the period January to August this year compared with a year ago, with the category of flats and townhouses contracting by just more than 19 percent y/y during this period.
On a monthly basis, residential building activity was lower on the planning as well as on the construction side in August, he says.
The number of new housing units for which building plans were approved was up by 12.8 percent y/y or 4 197 units in January to August this year.
“This improvement was largely supported by strong growth of 46.3 percent y/y in the higher-density segment of flats and townhouses,” says Du Toit.
He explains that the total number of housing units for which plans were approved was down by 3.6 percent y/y to 4 949 units in August.
Compared to July, the volume of plans approved was down by 1 190 units in August driven by the segment for smaller-sized houses which showed a drop of 1 083 units month-on-month.
Writing in the report, Absa Home Loans property analyst, Jacques du Toit says as a result, the future focus of new housing demand and supply is expected to be on the segments of smaller-sized houses and higher-density flats and townhouses.
The low y/y growth in levels of activity in the construction phase came on the back of a decline of 1 335 units or 19.2% y/y, in the number of flats and townhouses completed.
Du Toit says this reflects the supply and demand conditions still prevailing in this segment of the market.
In August the volume of new housing units completed was down by 7.3% y/y to a level of 3 247 which were 466 units less than the number of 3 713 completed in July.
“The affordability of housing is set to remain an important factor in the South African property market,” he says.
Gauteng would-be homeowners can snap up affordable properties in new developments north of Pretoria.
The new affordable housing projects in Rosslyn Ext 18 and 19 and Ga Rankuwa Extension/Unit 9, has two and three bedroom homes priced between R280 000 and R522 000.
Buyers can choose from six styles of freestanding homes measuring between 45 square metres to 85 squrae metres. In Ga Rankuwa, homes sell from R280 000 to R460 000 and from R365 000 to R522 000 in Rosslyn.
If buyers pay a 10 percent deposit, the home loan repayments on these houses will range from just under R2 300 a month to about R4 300 a month, according to Chas Everitt International marketing the development.
Christo Steyn, Pretoria north area principal says this puts them well within reach of the “gap” market of people earning around R15 000 a month.
The new homes will be equipped with items such as four-plate stoves with ovens, double sinks with wooden cabinets and ceramic sanitary ware and smart finishes such as stone cladding, he says.
Chas Everitt International is marketing brand new two- and three-bedroom homes to the north of Pretoria in Gauteng priced between R280 000 to R522 000. Six styles of home are available.
“The prices for these units include transfer costs but buyers will need to pay their own bond registration costs of between R11 000 and R13 000,” say Steyn.
He says buyers will have the option of adding items such as kitchen cupboards, solar geysers and garages at an additional cost.
Purple Orange Construction is the appointed contractor registered with the National Home Builders Registration Council to protect buyers.
The development sites are ready for construction to start immediately and Betterbond will assist would-be buyers with home loan applications. – Denise Mhlanga
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To be added to the article is that competency of banking staff also have an influence. I have been trying to get a building loan registered with standard bank for a year and still battling. I’ve had to deal with staff not able to read documents to losing them and anything you can think of in between. So the state of bonds applied for vs actual affordability at registration a year later, can have a big influence on the stats. - Denver
I think banks must stop blaming affordability as the main culprit for the slowdown in the building industry (Residential) They must start looking at their credit criteria, deposit requirements and in general unwillingness to grant loans to the residential property sector. We operate mainly in the affordable market (Less than R 500 000)in Gauteng and KZN, the demand is very strong, payment ability more than sufficient but deposit requirements and bank’s general unwillingness to do building loans being the main culprits. The fact remains we live in a country where a new middle class is emerging and the demand for finance for first time homeowners is a great opportunity for the banks to bank the unbanked, build relationships with the future middle income earners and in general do what banks are supposed to do, lend money. The affordable market is definitely paying the price for some irresponsible lending in the middle to higher income markets (Estates everywhere) and in my opinion some banks are missing out on one of the best opportunities ever to lend money to the merging market.I question the relevance of the Absa Home Loans Building Statistics report for the simple reason it is based on building loans granted by themselves and they have not granted any or very view building loans during the past three years. Maybe we must look at the new building loans being granted by FNB and Standard Bank and see if they share ABSA’s view specifically with relation to the affordable market. - Anton