27 Nov 2012
The value of recorded building plans passed (at current prices) increased by 7.3 percent (R3 555 4 million) during January to September 2012.
According to Statistics South Africa (Stats SA), the biggest percentage increase was reported for non-residential buildings (7.8 percent or R877.2 million), followed by residential buildings (7.3 percent or R1 596.8 million) and additions and alterations (7.0 percent or R1 081.3 million).
Six provinces reported year-on-year (y/y) increases in the value of building plans passed during January to September 2012.
The increase in the value of building plans passed was dominated by Gauteng (contributing 4.6 percentage points or R2 209.6 million) and Western Cape (contributing 4.4 percentage points or R2 145.3 million).
The decrease reported for KwaZulu-Natal (contributing -3.2 percentage points or -R1 559.6 million) counteracted the increases reported for building plans passed to a certain extent.
Stats SA says the real value of recorded building plans passed (at constant 2010 prices) increased y/y by 1.3 percent (R592.6 million) during January to September 2012.
The report reveals that the biggest percentage increase was reported for non-residential buildings (1.6 percent or R168.2 million), followed by residential buildings (1.3 percent or R277.5 million) and additions and alterations (1.0 percent or R146.9 million).
The seasonally adjusted real value of recorded building plans passed increased by 2.7 percent in Q3 2012 and an increase was reported for residential buildings (10.7 percent), while decreases were reported for non-residential buildings (-6.8 percent) and additions and alterations (-0.5 percent).
According to the report, the total value of buildings reported as completed (at current prices) increased by 7.0 percent (R2 172.6 million) during January to September 2012.
Increases were reported for non-residential buildings (21.3 percent or R1 555.2 million) and residential buildings (9.2 percent or R1 388.5 million), while a decrease was reported for additions and alterations (-9.0 percent or -R771.1 million) during the above-mentioned period.
Six provinces reported y/y increases in the value of buildings completed during January to September 2012 dominated by Gauteng (contributing 7.3 percentage points or R2 258.3 million) and a large decrease was reported in KwaZulu-Natal (contributing 1.8 percentage points or -R571.1 million).
The real value of buildings reported as completed (at constant 2010 prices) increased y/y by 1.8 percent (R571.1 million) and increases were reported for non-residential buildings (16.5 percent or R1 240.9 million) and residential buildings (3.2 percent or R471.0 million), while a decrease was reported for additions and alterations (-13.2 percent or -R1 140.8 million) during the above-mentioned period.
Stats SA says the seasonally adjusted real value of buildings reported as completed increased by 1.2 percent in Q3 2012 compared with the previous quarter.
Two of the three major categories reported increases, namely residential buildings (6.6 percent) and non-residential buildings (3.4 percent), while a decrease was reported for additions and alterations (-12.1 percent).
Commenting on the data, John Loos, household and property sector strategist at FNB Asset Finance says the results continue to show a very “settled” picture, with square metre-age of residential buildings completed hovering around levels similar to the pre-boom late-1990s.
“Over the past year we have seen only minor fluctuations above and below zero in terms of y/y percentage change in square metres completed.”
Using a three month moving average to smooth the data volatility, he explains that Q3 2012 y/y growth rate in square metres of residential buildings completed recorded +2.37 percent down from 7 percent in Q2 2012.
The square metres of building plans passed moved slightly better from a -7.2 percent decline in Q2 to a slightly positive + 2.4 percent, which hardly suggests much in the way of growth in activity to come, he says.
Loos points out that the third quarter saw a slight decline in the percentage of replacement gap (which reflects the percentage difference between the replacement cost of a home and the existing value of that home - calculated by valuers for insurance purposes upon valuing homes) from 24.1 percent in Q2 to 23.5 percent in Q3.
Currently, the residential building sector continues to battle to gain traction at a time when it faces heavy competition from a well-supplied existing home market, and the 23.5 percent replacement cost gap makes it tough to compete price-wise with the existing market, he says.
“Looking at the longer term trends in the composition, we may be seeing a mild trend change through 2012.
“The longer term declining trend in average unit size from a 141 square metre peak late in 2006 to 114.4 square metres by September 2012, is not expected to change direction.”
Loos explains that the low density nature of the South African housing stock is outdated, much of it having been built in the 1970s/80s when infrastructure and services around the cities were plentiful.
Densification is expected to be a long term trend as urban infrastructure and land scarcity mount, and costs of rates and tariffs bills skyrocket.
He notes that since 2012 to date, they have seen an increase in the percentage of flats and townhouses, from 24 percent of total residential square metres completed in 2011 to 27 percent, which is a reversal of a significant shrinking trend in this residential category since 2008 where it was as much as 37 percent of total square metres completed.
In 2013, he anticipates a sideways movement in overall building activity at best, with the significant replacement cost gap keeping price competition with the existing home market tough, while the building sector may have to contend with a slower economic growth and slowing real household disposable income growth rate.
“Of significance may be a change in the composition of building activity in 2013, with flats and townhouses becoming a larger portion of total residential completions as the urban densification process proceeds.”
He says with the relative price advantage of larger freehold homes having been whittled away by slightly better price growth in recent years, and by sharply rising operating costs in the form of rates and tariff hikes - smaller will be increasingly better” in the years to come.
Meanwhile, Jacques du Toit, property analyst at Absa Home Loans says the planning phase of new housing continued to contract up to September, while the construction phase showed some marginal growth over the nine-month period compared with a year ago.
The volume of new housing units for which building plans were approved was up by 1 478 units, or 12.4 percent to a total of 13 358 units in Q3 2012 from the second quarter.
Du Toit says the cumulative total number of plans approved was down by 4 705 units in the first three quarters of the year from the same period last year.
“This contraction was largely driven by the continued slowdown in planning activity in the third quarter in the segments for smaller-sized houses and flats and townhouses.”
He points out that flats and townhouses remain popular from an affordability point of view, with these trends evident of current and expected developments regarding household finances and investor demand for buy-to-let property.
The construction phase of new housing saw volumes increasing by 686 units in the third quarter of 2012, contributing to 900 more units built in the first nine months of the year compared with the corresponding period last year.
Du Toit says the higher number of new housing units constructed was mainly driven by the segment of flats and townhouses due to a significant rise in the number of plans approved for new flats and townhouses during 2011.
“Planning activity in this category of housing slowed down markedly during the course of 2012, which may impact negatively on construction activity during next year.”
Activity with regard to alterations and renovations to existing houses continued to contract up to September which is evident of the state of homeowners’ financial position and expected to continue to impact home improvement activity.
Future trends in residential building activity will still be affected by economic developments, the state of household finances and the level of consumer confidence.
He adds that new home building activity will most likely remain relatively subdued in 2013. – Denise Mhlanga
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