Johannesburg - Residential building activity continued to contract on a year-on-year (y/y) basis in the first two months of this year, but the contraction pace was slower compared with late last year.
Absa Home Loans said on Friday that the total number of plans approved in respect of new housing declined by 5.9% y/y in the months of January and February, with the volume of plans approved in the higher-density segment of flats and townhouses rising by 5.5% y/y in the same period.
Absa property analyst Jacques du Toit said higher-density residential developments were expected to be the main focus of the future demand for, and supply of, housing in SA, especially in the major and fast-growing metropolitan areas.
"This will be driven by the affordability of housing, which will depend on building costs, the state of household finances, the cost of mortgage finance, and the availability and cost of vacant development land and municipal services," he said.
In the construction phase of new housing, building activity contracted by 7% y/y in the first two months of the year, but the segment of flats and townhouses showed growth of almost 22% y/y in this period.
"Against the background of the abovementioned view regarding the expected future of housing in the country, the improvement in building activity in the higher-density category is encouraging," Du Toit said.
The real value of plans approved for new residential buildings was 7.1% y/y, or R180m, lower at R2.38bn in January and February from R2.56bn in the corresponding two months of 2010.
The real value of residential buildings constructed was down by 6.7% y/y, or R130m, at R1.85bn in January and February this year from R1.98bn a year ago.
These real values are calculated at constant 2005 prices. Residential building activity reflected demand and supply conditions in the market for new housing, and was expected to continue to experience some strain during the course of 2011.