Building activity in South Africa continues to be negatively affected by the rising level of interest rates, high input costs and the slowdown in consumer demand.
This trend will probably continue, as further monetary policy tightening is very likely, given that consumer inflation is expected to remain elevated for the rest of this year.
Growth in total building plans passed declined sharply in February to -22,9% year-on-year in February. The decline was led by huge decreases in two categories, namely non-residential building plans passed (to -55,2% from 63,8% in January) and additions and alterations (to -34,7% from 77,5% in January).
Residential building plans passed also declined to 5,7% year-on-year from 14,7% in January.
Residential building activity is expected to remain under pressure in 2008 on the back of rising interest rates.
The poor figures of building plans passed in February mirror the latest release of the First National Bank’s building confidence index, which declined to 66 in the first quarter of 2007 from 86 in the previous quarter. This is an indication that builders within the industry are not confident about the future development within the sector, and that current domestic pressures are having a stifling effect on building activity.
The rising level of interest rates and the power-supply crisis can be viewed as the fundamental drivers of the deterioration in the overall confidence within the industry.
Year-to-date (January and February 2008) growth in total building plans passed increased by a mere 2,3% compared with the same period in 2007. This was lower than the 19,5% increase for January 2008 compared with January 2007. On the quarter (December 2007 to February), total building plans passed increased by 8,9% compared with the previous quarter (September 2007 to November 2007).
Buildings completed declined significantly in February to -4.2% from 9,4% in January, largely due to a substantial decrease in non-residential completions (-24,5%) and residential completions (-8,5%).
Additions and alterations saw a marginal decline to 35,6% in February from 36,5% in January. Overall, the smoothed trend in building completions continued to be downwards. — I-Net Bridge