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.
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.
The opinions and views expressed are for information purposes only and are subject to change without notice. They should not be viewed as independent research, recommendations or investment advice of any nature.