Absa expects building activity to remain under pressure

According to the latest Statistics South Africa (Stats SA) figures on residential building activity for the period January-December 2008, building activity remained in negative territory for the entire year, this as a result of the difficult market conditions experienced in 2008, and the impact of this on the affordability and demand for housing.

In the period January-December 2008, the total real value of residential building plans approved by local authorities was down by 26,1% year-on-yearat R18,72 billion, compared with R25,33 billion recorded for the period January-December 2007, while the total real value for buildings completed showed a year-on-year decline of R1,7 billion, and was down 9,5% to R16,44 billion. All real values are at constant 2000 prices.

A total of 82 267 residential building plans were approved by local municipalities for all three major segments of the market (houses of <80 m©÷, houses of ¡Ã80 m©÷, and flats and townhouses), between January and December 2008. This reflects a 19,0% year-on-year drop when compared to the 101 566 plans approved for the same period 2007.This, Absa notes in its comment on the data, was the lowest number of plans approved since 2003.

The number of residential buildings completed across all three major segments from January to December 2008 showed a year-on-year decline of 8,9 % to 69 810 units when compared to a total of 76 662 completed in 2007.
The affordable housing segment (<80 m©÷) of the market, took the biggest knock comparatively, with a recorded 14,7% year-on-year drop.

For the period of January to December 2008, 42,9% of total building plans approved were from the Gauteng province, followed by the Western Cape at 21,9% and the least contributing province being the Northern Cape with only 681 plans approved in that province (0,6% of the total).

Year-on-year growth levels were at a decline of 27,4% for Gauteng and 26,4% for the Northern Cape. The Western and Eastern Cape provinces were the only provinces which recorded a slight improvement with a growth of 4,2% and 8,9% respectively, in the same period.

In terms of residential buildings completed between January and December 2008, Gauteng experienced the smallest year-on-year decline of 2,0%, with the Free State province highest at 53,4%, while Mpumalanga and Kwazulu-Natal experienced positive year-on-year growth levels of 23,5% and 30,4% respectively.

With the economy expected to only start showing signs of improvement later in the year, as inflation and interest rates levels gradually decline further, residential building activity is expected by Absa to remain under pressure for much of 2009
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