Building update: Building plans passed and buildings completed fell in January 2018, reflective of poor sentiment in 2017

14 Mar 2018

Annabel Bishop

Chief Economist

Figure 1: Growth in the value of total building plans passed, completed in South Africa – constant prices (y/y %)
  • The real value of building plans passed decreased by 4.5% y/y in January 2018, after increasing 1.5% y/y in December, weighed down by the non-residential sector (see figure 1).
  • This indicated fall in future construction activity can be attributed to low business confidence during the period under review, given the lags. However business confidence is improving, supported by considerably increased BER business confidence numbers released yesterday. The gauge lifted 11 points, with building contractor business confidence rising significantly by 7 points, to 41 in Q1.2018.
  • Specifically, the real value of the residential component of building plans passed rose 1.5% y/y in January, after 5 consecutive months of year on year declines. While the real value of non-residential buildings passed plunged 32% y/y during the same period.
  • Stronger than expected macroeconomic growth, coupled with the substantial lift in business confidence for Q1.2018, against a backdrop of perceived improvement in political and policy certainty, should translate into higher private sector fixed investment going forward. We should therefore see a notable uptick in building plans passed (building pipeline) going forward (see figure 2).
Figure 2: Gross fixed capital formation versus the BER Business Confidence Index
yFigure 3: Jan 2018 - Contribution to the % ch buildings passed at provincial level, current prices
  • The real value of total building plans completed fell 16.3% y/y in January 2018, following a 10.6% y/y decline in December. All sub-components of this category fell with the real value of residential buildings completed, non-residential buildings completed and additions and alterations dipping 4.6% y/y, 43.4% y/y and 5.3% y/y respectively.
  • In January 2018, the value of building plans passed at current prices fell a negligible 0.1% y/y. Residential buildings plans passed were up 6.2% y/y, while non-residential buildings declined by 28.9% y/y during the same period at current prices.
  • The largest negative contribution to the 0.1% y/y decline came from Gauteng, which fell 22.9% y/y in January 2018, yielding a contribution of -10.6% to the headline number. The Western Cape and Free State on the other hand were the highest positive contributors at 5.2% and 5.0% respectively (see Figure 3).
  • During the same period, the value of buildings completed at current prices dipped 12.4% y/y, with residential buildings completed falling by 0.2% y/y and non-residential buildings completed declining 40.8% y/y.
  • On a provincial basis the largest influence recorded came from the Western Cape which contributed 9.6%, on growth of 54% (see figure 4).
Figure 4: Jan 2018 - Contribution to the % ch in buildings completed at provincial level, current prices