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Building activity to remain subdued

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Johannesburg - The month of July 2014 saw the planning phase of residential building activity in the SA market for new housing showing strong growth on a year-on-year basis, as reflected by the number of building plans approved by local government authorities, said Jacques du Toit, property analyst at Absa Home Loans.

"However, the construction phase - that is housing reported as completed - showed a further contraction in July from a year ago, although the pace of contraction has slowed down significantly from previous months," said Du Toit.

"These trends in private sector-financed residential building activity are from data published by Stats SA."

The number of new housing units for which building plans were approved by local government institutions was up by a massive 41.9% year-on-year (y/y) in July this year.

"The continued improvement in levels of activity in the planning is expected to be reflected in a higher level of construction in due course," said Du Toit.

The construction phase of new housing - that is the number of new units reported as completed contracted for the fourth consecutive month in July, by 6.8% y/y with all categories of housing showing lower levels of completion compared with the corresponding period last year.

New housing construction activity was down by 3 875 units to 20 599 in the period January to July from 24 474 units in the corresponding period last year.

The average building cost of new housing constructed averaged R5 682 per square metre in the period January to July this year, resulting in an increase of 14.1% y/y from R4 981 per square metre in the corresponding period last year.

"Building costs are affected by factors such as building material costs, labour costs, transport costs, equipment costs, land values, rezoning costs and developer and contractor holding costs and profit margins," said Du Toit.

"Against the background of trends in and prospects regarding the economy, household finances, and consumer and building confidence, residential building activity is expected to remain relatively subdued and stay around the levels of the past 4½ years in the remainder of the year."

- Fin24

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