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18 Jun 2013

According to data from Stats SA, there is positive improvement in building completions, with the continuation of smaller houses being built.

Loos anticipates that 2013 will see single-digit growth in overall residential building activity and with the drive towards a smaller average home size expected to continue, that would translate into a slightly more rapid growth rate in the number of units completed.

Statistics South Africa (Stats SA) data shows that the total value of Total value of recorded building plans passed at (current prices) increased by 33.4 percent (R4 920 8 million) during the first quarter of 2013 and the biggest increase was reported for non-residential buildings (107.9 percent or R3 137 1 million), followed by residential buildings (22.2 percent or R1 529 2 million) and additions and alterations (5.2 percent or R254.6 million).

Six provinces reported year-on-year (y/y) increases in the value of building plans passed in Q1 2013 with Gauteng dominating, recording a total contribution of 23.9 percentage points or R3 512 8 million.

Stats SA says six provinces reported y/y increases in the value of buildings completed in Q1 2013 dominated by the Western Cape (contributing 7.5 percentage points or R757.4 million), followed by KwaZulu-Natal (contributing 5.6 percentage points or R560.3 million) and Gauteng (5.3 percentage points or R531.4 million).

According to Stats SA, the real value of buildings reported as completed (at constant 2010 prices) increased y/y by 12.4 percent (R1 198.9 million) in Q1 2013 with the biggest increase recorded for non-residential buildings (22.7 percent or R519.3 million), followed by additions and alterations (14.2 percent or R361.3 million) and residential buildings (6.6 percent or R318.3 million) during the above-mentioned period.

John Loos, FNB household and consumer sector strategist says the residential building activity looks set to improve moderately further in 2013.

He notes that Stats SA data show further decline in the average size of home completed to 108.8 square metres, now significantly lower than the 141 square metres reached in September 2006 near the end of the property boom.

“This smaller average size has been achieved through more rapid growth in the category dwelling houses smaller than 80 square metres which grew by 20.8 percent y/y in terms of the number of units completed in Q1 2013.”

Loos says this points to solid growth in the Affordable Housing market and the flats and townhouses category also saw solid growth of 12 percent in the same period, while the larger category of dwelling houses larger than 80 square metres showed a decline of -5.8 percent.

“The trend towards smaller average size of homes being built is expected to continue in the long term.”

Loos anticipates that 2013 will see single-digit growth in overall residential building activity and with the drive towards a smaller average home size expected to continue, that would translate into a slightly more rapid growth rate in the number of units completed.

According to Jacques du Toit, property analyst at Absa Home Loans, growth in planning and construction activity in the segment for flats and townhouses remained strong in Q1 2013 while growth in levels of building activity in the category of housing larger than 80 square metres remained subdued.

Du Toit says in the category of smaller-sized housing, growth of 28.9 percent y/y was recorded with regard to the number of units reported as completed, while the construction of houses larger than 80 square metres and flats and townhouses contracted by 18.3 percent y/y and 21.9 percent y/y respectively in March.

Residential building activity is expected to continue to reflect conditions with regard to the economy, household finances, consumer confidence and factors impacting the market for new and existing housing, which will show up in the demand for and supply of new housing, property market activity, transaction volumes, property price growth and the demand for mortgage finance, according to Du Toit. – Denise Mhlanga

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