The supply of new residential buildings in South Africa has not kept up with the strong demand for residential property over the first nine months of 2004, according to Absa senior economist Jacques du Toit, reflected by the relatively strong increase in building costs compared with inflation.
Du Toit was commenting on Monday on the latest building statistics released by Statistics South Africa, which showed that the total real value of building plans passed for houses increased by 31,1% to R9,3-billion (at constant 2000 prices) in the first nine months of 2004 compared with a year earlier. In September, the real value of plans passed for houses was R1,2-billion, up 17,9% year-on-year (y/y) compared with the same month last year.
The total real value of building plans passed for flats and townhouses increased by 48% to R4-billion in the first nine months of 2004 compared with a year ago. In September this year, the real value of plans passed for flats and townhouses came to R555-million, up 59,1% y/y compared with September 2003.
Meanwhile, the total real value of new houses completed in the first nine months of 2004 increased by 25,4% to R4,9-billion, (at constant 2000 prices), compared with the same period last year. In September this year, the real value of new houses completed was R629-million, 41,1% y/y higher than the same month last year.
The total real value of flats and townhouses completed during January to September 2004 increased by 50,7% to R2,3-billion rand versus a year earlier. In September this year, the real value of new flats and townhouses completed came to R237-million, up 31,2% y/y compared with September 2003.
Writing in Monday’s Absa Property Trends research note, Du Toit noted that with the number of new building plans passed exceeding that of buildings completed, supply of residential housing had seemingly not kept pace with demand during the year.
This was reflected in the rising cost of building a new house, with the average cost up 16,8% in the first three quarters of 2004 compared to a year ago, well above the average headline consumer price inflation rate of 0,8% over the same period.
“This relatively strong increase in building costs compared with inflation is a reflection of the continuing strong demand for residential property,” he noted. “Factors such as shortages with regard to certain building materials,
constraints in terms of skilled labour in the construction industry, and an increasing scarcity of suitable and properly serviced land for residential development have become important.
“These developments will have a negative impact on supply and delivery times with regard to housing, which will eventually be reflected in higher building costs, as well as property prices.”
However, he concluded, new residential properties in the pipeline should address the supply constraint towards the end of the year and into 2005, provided that the construction industry could cope with the completion of residential buildings already in the planning phase. – I-Net Bridge.