Less People Building Homes in SA

Home Building Sector Slipping

A business reporter for Dispatch Online has drawn attention to the lack of business confidence in the home building sector, which appears to have dropped to levels last seen 7 years ago, according to data released by ABSA Home Loans and Statistics South Africa. This is on the back of rising food prices and high interest rates in the first half of this year.

Stats SA has findings that show building plans passed in the Eastern Cape for new houses, flats and townhouses between January and July 2008 are down by 27.6%. “With the household sector under severe financial pressure as a result of rising inflation and interest rates over the past two years, activity with regard to alterations and additions to existing properties has also tapered off markedly,” according to Jacques du Toit, a senior property analyst at ABSA Home Loans.

These recent developments in the building and construction sectors have ensured that confidence has plummeted to levels last experienced in 2001. “This is a clear indication of current conditions and the prospects for this sector in the economy over the short medium term,” says du Toit. Building plans for alterations and additions in the Eastern Cape also went down 44.4% since the beginning of the year.

Figures in the Eastern Cape paint a much darker picture than the national average drop of 19.8% and 20.6% for new residential projects and alteration plans respectively. This can be interpreted as 50236 units nationally from the period January to July 2008, as compared to 62634 units over the same time last year.

However, Cashbuild managing director Pat Goldrich says that the trend is not evident in the building materials supplier sales. In fact, results for the year ended June 2008 show that revenue rose by 17% nationally, despite the national average drop of 19.8% in building plans passed. “We’ve just released our annual results and we’ve grown attributable profit by over 30%. With the right pricing, service and location we’ve managed to grow our sales and profit,” Goldrich said.

Progressive Builders is based in East London and manager Mark de Swart said that his business did not experience abnormal fluctuation in the first seven months of this year. “There has been some decline, but it’s nothing outside normal fluctuation. Overall, it’s not that significant,” he said.

Even so, building plans passed in the Eastern Cape fared a lot better than other provinces: Gauteng (-28.5%), North West (-50.5%), Free State (-39.1%) and the Northern Cape (-32.2%). In contrast, the Western Cape has actually improved by 12.6%, while KwaZulu Natal and Mpumalanga are both up by 0.6%. According to analysts, the trend is likely to continue over the next year or so as economic conditions remain bleak.

“The expectation is that the residential building and construction sector will continue to experience difficult business conditions for the rest of the year and into 2009 on the back of macro-economic and household sector related developments and trends,” said du Toit.

The information in this article is courtesy of Siya Miti (“EC home-building suffers downturn”, Dispatch Online, 22 September 2008).

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