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5.5% pricier to build a house than a year ago – analyst

Jun 23 2018 15:24

The average building cost of new housing completed increased by 5.5% year-on-year in the first four months of 2018, says ABSA property analyst Jacques du Toit.

The cost increased to R7 437/m², says Du Toit.

Building activity in the planning phase – that is, the number of building plans approved by local government institutions – also dropped on a year-on-year basis.

The number of building plans approved for new housing increased by 18.8% year-on-year to 19 423 plans for the period January to April 2018. The number of new housing units reported as completed, however, dropped by 22.7% year-on-year to 10 440 units for the first four months of the year.

Alterations and additions to existing houses remained under pressure, said Du Toit, with both the building area approved and the building area reported as completed contracting marginally year-on-year between January and April.

"In view of economic trends and expectations, levels of residential building activity are forecast to remain largely in line with those of the past few years," said Du Toit.

Lag

A lag between the number of building plans passed in April and the number of completions in the same month indicates that building activity could accelerate in the coming quarters, according to Lara Hodes of Investec.

However, Hodes added that advance indications provided by the FNB Building Confidence Index (BER) for the second quarter of 2018 point to a dip in confidence along the value chain.

Hodes also said that, while all the sub-sectors of the 'building plans passed' category experienced growth, the non-residential component was the best performer.

"Although [for] the second quarter of 2018, building confidence outcome is less than favourable, we are expecting economic growth to pick up for the remainder of 2018, which should propel an uptick in sentiment levels, driving fixed investment and therefore building activity," said Hodes.

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investec  |  absa  |  sa economy  |  building  |  property
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