Figure 1: Growth in the value of total building plans passed, completed in South Africa – constant prices (y/y %)
  • In Q1.18, the real value of building plans passed rose by 2.1% y/y, following a contraction of 1.5% y/y in Q4.17. Growth in the residential component of building plans approved logged moderate growth of 0.5% y/y in Q1.18, while the non-residential category fell by 6.4% y/y (see figure 1).
  • On the other hand, the real value of building plans completed fell sharply in Q1.18 by 17.0% y/y, following growth of 15.6% y/y in Q4.17. Both the residential and non-residential components dipped by 17.1% y/y and 29.3% y/y respectively in Q1.18, while the additions and alterations segment showed a 4.1% y/y increase. This would indicate that consumers invested in their homes, instead of purchasing new properties, owing to affordability constraints in Q1.18.
  • The lag between plans passed and completions indicates that building activity could accelerate in the coming quarters. This would corroborate with advance indications provided by the FNB/BER’s Q1.18 Building Confidence Index, which rose 12 points to 43, its highest reading since March 2017(see figure 2) . According to the BER five of the six subsectors along the value chain recorded higher levels of confidence in the quarter.
  • With consensus GDP growth forecasts having been revised upwards, coupled with elevated business and consumer confidence levels, fixed investment should receive a boost, driving activity in the building sector.
Figure 2: BER Building Confidence Index
Figure 3: Q1.18 - Contribution to the % change in buildings passed at provincial level, current prices
  • Disaggregating the data on a provincial basis, the largest positive contributor to this lift, stemmed from the Western Cape region, which grew by 13.2% y/y during the period, yielding a contribution of 3.9% to the headline outcome. This was followed by the Eastern Cape, which contributed 1.9% to the topline number. Gauteng, the North West Province and Limpopo on the other hand detracted from growth, yielding -2.6%, -0.7% and -0.2% respectively (see Figure 3).
  • During the same period, the value of buildings completed at current prices fell by 13.7% y/y, with the Gauteng and Kwa-zulu Natal regions responsible for most of this decline (see figure 4).
  • “Banks are showing an increased appetite to lend” according to Q1.18 property statistics recently released by Ooba, a leading home loan originator. This coupled with the cut in interest rates in March and slower property price growth, should assist the residential property market going forward.
Figure 4: Q1.18 - Contribution to the % change in buildings completed at provincial level, current prices
Figure 5: South Africa: residential building plans passed and completed: rand value (%, y/y)
Figure 6: South Africa non-residential buildings passed and completed: rand value (%, y/y)