Fin24

Building costs strengthen home prices

2012-08-23 16:59

Johannesburg - Rising building costs are pushing property prices higher, estate agency Chas Everitt said on Thursday.

The cost of building a new home increased by 4.3% in the second quarter of this year, compared to the same period in 2011, the agency said, citing the Absa Housing Review.

"This put the average nominal price of a new house at R1.535m, or some 34.4% ahead of the second quarter average of R1.007m for an existing house," Chas Everitt MD Berry Everitt said in a statement.

This resulted in demand for housing being channelled away from off-plan homes and towards pre-owned properties, bolstering their prices.

Levels of residential building capacity had continued to fall off, making it more difficult to buy a newly-built home.

In the first half of the year, the number of building plans passed for new housing units dropped 11.6%, compared with the same period last year, to 23 095 units.

Most of these units would take between 18 months and two years to complete.

Although overall numbers of new homes rose by 3.4% year-on-year, or 645 units, there were significant declines in six of the nine provinces, particularly in units less than 80 square metres.

This was the category favoured by first-time buyers.

"The main reason for this decline is rising building costs, which at the moment are preventing developers from being able to deliver new homes at competitive prices, and in many cases causing them to abandon their plans altogether," Everitt said.

Building costs rose by 5.7% in the first quarter of 2012.

The industry had to contend with increases in the cost of labour, transportation and electricity.

Overall building costs were expected to rise by 12.1% this year, and 16.3% next year, according to the Bureau for Economic Research.

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