Building industry can expect relief by 2010

The construction sector would only benefit from interest rate cuts in 2010, the Cement & Concrete Institute (C&CI) said on Wednesday in its annual review for 2008.

”If, as expected by a large number of economists, prime interest rates are lowered to around 12% during the course of 2009, then investor confidence will be boosted and economic growth stimulated,” said John Sheath, marketing manager of C&CI.

The expected positive impact on the building industry would, however, only be felt in 2010, he said.

Affordability had to improve and confidence levels had to be restored for the building industry to enjoy more prosperity.

”Only once interest rates have been lowered substantially, will the investment growth outlook for the residential market improve.

”The drop in house prices is expected to impact negatively on new residential developments and it can therefore be expected that construction activity in the residential sector will remain depressed for the next 12 to 18 months.”

Sheath said investment growth in non-residential construction looked slightly more positive as plans approved for this sector increased by 11% in 2008.

”The actual building of these projects will, however, depend on an improved economic outlook and business confidence.” The C&CI regarded the outlook for the civil engineering industry as more promising.

”Double-digit growth rates were experienced during the past few years, but may be replaced by more modest single-digit growth, provided local and provincial governments are able to effectively implement budgetary allocations to improve service delivery,” Sheath said.

The role of state-owned enterprises was very important and this was expected to continue in the near term. Turning to cement sales in 2008, the C&CI said the 14,7 million tons of cementitious products sold were 3,9% below that of 2007.

This tonnage included 1,4 million tons of fly ash and slagment purchased for enhancing and extending concrete mixes. ”It should also be noted that although 2008 sales showed a decline over the previous year, this follows a period of seven years of positive growth in the industry and — on more than occasion — at double-digit levels,” Sheath pointed out.

Cement sales to the nine provinces in South Africa were down 4,6% with major reductions in demand in Gauteng (-11%) and Western Cape (-7,9%). — Sapa

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