While overall levels of South African building activity are being maintained, the outlook for short-term growth has declined on the back of higher rates, according to analysts.
The -8,8% decline in residential building plans passed in November marked the fifth successive month of negative growth in the sector, while on a seasonally adjusted basis, growth declined -2,7% month-on-month (m/m) and -6,3% quarter-on-quarter (q/q).
Non-residential building plans passed fared similarly with -27,3% growth for November. However, seasonally adjusted m/m growth, although still negative at -14,1%, was off strong growth in October, and q/q growth was still positive at 8,9%.
Analysts say these oscillations between growth and decline highlight the volatile movements of building plans passed from month to month.
Overall plans passed declined y/y for the fourth consecutive month, and seasonally adjusted q/q growth was negative at -2,2%. However, in real, seasonally adjusted figures, the monthly value of plans passed has remained in a range of R3,7-billion to R4-billion for the past year — “suggesting that building activity has stabilised at these levels”, according to independent economic analysts RLJP.
“It was as recently as 2002 that the real value of building plans passed was in a range of R1,6-billion to R2,1-billion per month, roughly half of the current value.
While the double-digit growth of 2004 and 2005 is clearly over, the sector is experiencing solid performance at these high levels,” they add.
In terms of building completions, y/y growth for residential buildings was -16,7% in November. Even on a seasonally adjusted basis, the monthly decline in completions was -11%, while q/q growth was low at 0,7%.
Non-residential completions, on the other hand, showed a second successive month of double-digit y/y growth, at 36,6%.
Month-on-month seasonally adjusted growth was 4,7% and q/q growth was a massive 29,6%.
This would certainly indicate that growth in the non-residential completions has surged ahead while residential completions are subsiding,” say RLJP.
The value of overall building completions has remained in a band of R1,9-billion to R2,3-billion for the last year, in a mirroring of the trend in plans passed. When comparing the level of real activity to that of 2002, a similar story unfolds: the constant value of building completions in 2002 was bound in a range of R0,9-billion to R1,3-billion.
“Overall, while building activity growth has clearly come off the boil in the last few months, the levels of activity, particularly in completions, have been maintained for the last year. While activity in the residential sector has clearly fallen, partially as a result of rising interest rates, the non-residential sector has experienced an increase in activity,” conclude the analysts. ‒ I-Net Bridge