Depressed state of residential building activity continues

Residential building activity in the South African housing market continued to experience a substantial amount of strain on a year-on-year basis up to March 2010. On a month-on-month basis conditions in the planning phase deteriorated further, while some improvement was noticed on the construction side.

With regard to plans approved for new housing, the real value was down by 10,6% year-on-year (y/y) in the first quarter of 2010 to R3,85 billion from R4,31 billion in the first quarter of 2009. The real value in respect of residential buildings constructed was 38,8% y/y lower at R3,08 billion in the first three months of 2010 compared with R5,03 billion in the same period last year. These real values are calculated at constant 2005 prices.

The volume of building plans approved for new housing was significantly lower in all three segments (houses, flats and townhouses) in January-March this year compared with the first quarter of 2009. The number of plans approved for new housing was 39,1% y/y down to 2 726 units in March (-19,9% y/y at 3 859 units in February).

In the construction phase of new housing, reflecting past trends in the planning phase, the number of units completed in the three segments of the market was substantially lower in the first quarter of the year. In March the volume of new housing units constructed was 37,5% y/y lower at 3 403 units, but was slightly up on a month-on-month basis from 3 139 units in February.

Based on trends in residential building activity up to the first quarter of 2010, which reflects demand and supply conditions in respecting of new housing, the sector is forecast to continue to experience tough conditions for most of the year.

Jacques du Toit is a Senior Property Analyst at Absa Home Loans.

Article by: Jacques du Toit -