Small home building activity grows strongly at start of year

Building activity in the flats and townhouse segment of the residential property market showed strong growth in the first two months of the year, but low growth was evident in the larger house segment.

However, Jacques du Toit, a property analyst at Absa Home Loans, said last week that the continued contraction in the level of activity for the planning phase for smaller-sized houses remained a concern in view of the strong demand for housing towards the lower end of the residential market.

Du Toit said the number of building plans approved overall for new housing dropped by 102 units, or 1.3 percent, year on year in the first two months of this year.

He said this was largely the effect of plans approved for smaller-sized houses contracting by more than 22 percent year on year during this period while strong growth was recorded in the flats and townhouses segment.

The planning phase, as depicted by building plans approved for new housing, contracted by a small margin up to February, while the construction phase benefited from double-digit growth in the categories of houses smaller than 80m and flats and townhouses, Du Toit said.

He added that the volume of new housing built showed a cumulative rise of about 900 units or 16.3 percent year on year in the two-month period, with this growth driven by the segments for smaller-sized houses and flats and townhouses.

Statistics SA said the number of building plans approved for flats and townhouses rose 35.4 percent to 2 271 units from the corresponding two-month period last year. Flats and townhouses completed rose by 37.2 percent to 2 107 units.

However, building plans passed for houses smaller than 80m declined by 22.2 percent to 2 536 units in the period.

By contrast, the number of houses smaller than 80m2 completed increased by 13.7 percent to 2 501 units from the corresponding period last year.

In addition, Du Toit said the number of building plans approved last year for houses smaller than 80m declined by 21.1 percent, which was expected to adversely affect the construction phase of this type of housing later this year.

Building plans passed for houses larger than 80m2 added 1 percent in the first two months of this year to 2 676 units. The number of larger houses completed increased by 1.6 percent to 1 813 units.

Stats SA figures revealed that the real value of plans approved for new residential buildings increased by 14.2 percent year on year to R4.76 billion in the first two months.

The real value of residential buildings constructed advanced by 18.4 percent year on year to R3.38bn in the same period.

Du Toit said the market for new housing would be affected by trends on the macroeconomic front, the state of household finances, consumer confidence and property market-related factors.

"These factors will be reflected in new housing demand and supply conditions, market activity, transaction volumes, price levels and the demand for mortgage finance," Du Toit added.

(Business Report)

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