Value of approved building plans declines

Investec says the real value of total building plans passed contracted for the fourth consecutive month in August, falling by 6.2% year on year, from a decline of 22.6% year on year in July.

The bank says in the first eight months of 2016, the value of total building plans passed fell by 5.9% year on year. In August, the real value of total buildings completed contracted at a rate of 17% on an annual basis, following a fall of 14.1% year on year in July.

“However, on a year-to-date basis, the value of total buildings completed grew by 4.2% year on year,” Investec economist Kamilla Kaplan said on Friday.

The bank said survey data, if coupled with the underperformance reflected in the July and August buildings plans and completions, suggested the building sector was likely to achieve only flat to modest growth in the third quarter of 2016.

It also said the Reserve Bank had communicated it may be nearing the end of its rate tightening cycle. Consumer inflation was expected to return to the 3% to 6% target range in 2017, reducing pressure on the Bank to raise rates further.

However, the Bank remained concerned about depreciation in the rand and elevated inflation expectations. “As such, another interest rate hike next year cannot be precluded,” Kaplan said.

This would continue to be negative for the property market, and also damp activity in the general construction sector which, in turn, would continue to make small or negative contributions to economic growth.

Arup Southern Africa CEO Poya Rasekhi said on Friday the built environment industry in SA had been hit hard by the lack of growth in the economy. “Large infrastructure, vital for the country to thrive, is just not getting off the ground as it should,” he said.