Residential building and construction activity slowed down significantly in the first half of 2008
The latest buildings statistics released by Stats SA point to sharply declining levels of activity in the residential building and construction environment, which confirm the financial pressures households are experiencing, and which have worked through t
Residential building statistics released by Statistics South Africa for the first six months of 2008 not only confirm the current slowdown in the housing market, but also point to conditions in this segment of the property market to probably remain subdued for the rest of the year and into 2009.
In the period January-June this year the real value of building plans approved by local government institutions for new residential buildings was 18,7% year-on-year (y/y) lower at R10,61 billion, which was R2,44 billion less than the R13,05 billion recorded in the same period last year. All real values are at constant 2000 prices.
In volume terms residential building plans approved for the three major segments of the market (houses of <80m©÷, houses of ¡Ã80m©÷ and flats and townhouses) dropped by 26,8% y/y to 38 691 units in the first six months of 2008. In the second quarter of the year, the number of housing units for which plans were approved was down by a massive 36,3% y/y to 18 272. This lower volume of plans approved in the first half of 2008 will result in a lower number of housing units constructed in the rest of the year and into next year.
The real value of new residential buildings completed was down by 13,3% y/y to R7,42 billion in the first half of 2008. This was R1,14 billion less than the R8,56 billion recorded in the first six months of 2007.
In January to June this year the number of new housing units constructed in the abovementioned three segments of the market was at 31 673 as much as 15,5% down on the total number of 37 491 units completed in the first half of last year. In the second quarter of 2008 the total number of housing units completed was down by 22,1% y/y to 15 811 from 20 284 units completed in the second quarter of 2007. At a regional level, the number of plans approved for new housing units was lower in each of the nine provinces in the first half of 2008 compared with the same period last year. In Gauteng, with a 43,7% share of the national total, a decline of 31,2% y/y occurred, with a drop of 11,9% y/y recorded in KwaZulu-Natal and a decline of 2,7% y/y registered in the Western Cape. Combined, these three provinces constituted 77,7% of the national total in January to June this year. In terms of the number of housing units completed at provincial level, seven of the nine provinces recorded a drop on an annual basis in the first six months of the year.
In terms of alterations and additions to existing houses the total square meters for which plans were approved have slowed down substantially from positive year-on year growth of 33,3% in the fourth quarter of 2004 to a decline of 24,8% in the second quarter of 2008, with the year-on-year growth being negative since the final quarter of 2006. This is largely a reflection of the severe financial strain households have experienced over the past two years on the back of rising inflation and interest rates. While there may be a perception that households will turn to renovating and expanding their existing properties during periods of difficult economic conditions rather than selling and buying up, the affordability of alterations and additions is also under pressure in times when financial strain is experienced. Although the year-on year growth in completed alterations and additions was positive in the second quarter of 2008, it was much lower than in early 2006.
