The latest data on building plans passed and residential buildings completed for the first six months of 2005 point to a sharp 43,5% drop in the number of lower-income, smaller houses completed and a 10% fall in the number of plans passed for such houses, according to Absa senior economist Jacques du Toit.
They also highlight greater demand for higher-density residential developments, such as townhouses and flats, than for stand-alone houses, he said in a research note on Thursday.
Wednesday’s data from Statistics South Africa revealed that the real value of building plans passed for residential buildings increased by 53,5% year-on-year (y/y) to R6,9-billion (at constant 2000 prices) in the second quarter of 2005, compared with growth of 8,3% in the first quarter of the year.
In the first six months of this year, the real value of building plans passed for residential buildings improved by 36,6% y/y to R12,7-billion compared with R9,3-billion in the same period last year.
At the same time, the total real value of new residential buildings completed in the second quarter of 2005 increased by 34,6% y/y to R3,5-billion (at constant 2000 prices) compared with growth of 45% y/y in the first quarter of 2005.
In the first half of 2005, the real value of residential buildings completed increased by 39,1% y/y to R6,4-billion, versus R4,6-billion the previous year.
Commenting on the data, Du Toit said that the figures showed that the number of buildings plans passed for houses of 80 square metres and above rose by 12,4% y/y in the first half of 2005, while those for flats and townhouses increased by a substantial 29,5% y/y during the same period.
“This is an indication of a greater emphasis on higher-density residential developments, most probably as a result of the increasing scarcity of suitable and properly serviced land, especially in popular urban areas,” Du Toit observed.
“Relatively high property prices in recent times have, in all probability, also contributed to a strong demand for flat and townhouse developments, specifically by first-time and low- to middle-income home buyers.”
Meanwhile, he pointed out, the number of new houses (80 square metres and above) completed increased by 35,4% year-on-year in January to June this year, lower than the 43,3% growth seen in the number of new flats and townhouses completed during the same period.
“The main reason for this was probably still the lagged result of strong demand for housing during the course of 2004, when plans passed increased by 30,4% y/y for houses and 40,8% for flats and townhouses,” du Toit added.
Finally, the data revealed that the number of building plans passed at the lower end of the market (houses smaller than 80 square metres) declined by 10,1% y/y in the first six months of 2005, while the number of these houses completed dropped by a massive 43,5% year-on-year during the same period.
Du Toit ascribed this development to the fact that property developers still find it difficult to realise an acceptable profit in this market segment.
“Factors such as expensive development land, high costs of and delays in rezoning land for high-density, middle-class residential developments have contributed to a sharp increase in holding costs.
“In addition to these factors, building cost increases are still well above the inflation rate, resulting from shortages in certain building materials and skilled labour. These factors have put profit margins under pressure in this segment of the property market,” he concluded. — I-Net Bridge