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Building confidence is at a six-year high

Dec 02 2014 10:23

Cape Town – Building confidence in South Africa hit its highest levels since 2008 in the fourth quarter of 2014, boosting work across the rest of the building value chain, according to the latest FNB/BER building confidence index.

Key points from the index:

- Confidence in the building sector, as measured by the FNB/BER building confidence index, jumped to 60 points in the fourth quarter of 2014.

- After edging up to 45 points in Q3, the index increased by 15 points.

- The current level of the index indicates that more than half of the respondents are satisfied with prevailing business conditions.

- The pace of growth in residential building activity quickened unexpectedly during the quarter, boosting work across the rest of the building value chain.

- Overall, the recovery in the building sector gained noticeable momentum in 4Q2014, following the mild increase in activity recorded last quarter.

Building sector revival

“This is the highest level of the index since the beginning of 2008 and confirms that the building sector is in the midst of a revival,” said John Loos, property economist at FNB.

Listen:


The current level indicates that more than half of the respondents are satisfied with prevailing business conditions.

Main contractor confidence jumped to 66 index points in Q4, from 53 last quarter. Confidence of both residential and non-residential contractors rose by double digits during the quarter.

However, according to Loos: “Although confidence in both sectors improved, the residential market is looking far more buoyant than the non-residential market, a trend we picked up last quarter already.”

The growth in residential building activity accelerated nicely in Q4. This in turn boosted overall profitability.

In contrast, non-residential building activity weakened. “Confidence was higher on the expectation that building activity and profitability will improve in 2015,” said Loos.


Sub-contractor confidence rose by three index points to 50 in Q4.

The continued improvement in the residential market has boosted activity in other building related sectors. Retail sales and orders of building material remained robust. As a result, the confidence of retailers of hardware was unchanged at a high 74 index points.

Loos noted that “while other retailers are still under pressure, retailers of hardware have benefitted from the recovery in the building sector”.

Continued growth in domestic manufacturing sales and production lifted the confidence of manufacturers of building material.

Looking ahead, the amount of work conducted by architects and quantity surveyors was generally higher during the quarter. As a result, architect business confidence remained at just under 50 index points while that of quantity surveyors rose to 60 index points in Q4.

“The increase in pipeline activity supports further growth in building activity in coming quarters,” said Loos.

Value chain boost

According to the survey, the recovery in residential building activity recorded in Q3 gained noticeable momentum in Q4. This boosted work along the rest of the building value chain. However, non-residential building work slowed further.

Furthermore, the rise in activity along the building pipeline suggests that the current recovery is sustainable. However, impending interest rate hikes may halt this fledgling recovery before it can gain more significant traction.

* The FNB/BER building confidence index can vary between zero (indicating an extreme lack of confidence) and 100 (indicating extreme confidence). It reveals the percentage of respondents that are satisfied with prevailing business conditions in six sectors, namely architects, quantity surveyors, main contractors, sub-contractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware.

fnb  |  ber  |  building confidence
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