Build­ing plan data point to peo­ple down­siz­ing

The Star Early Edition - - NEWS - Helmo Preuss

THE REAL (at con­stant 2015 prices) value of build­ing plans passed by larger mu­nic­i­pal­i­ties in the first four months of 2017 de­clined by 21.9 per­cent year-on-year (y/y).

All three ma­jor build­ing cat­e­gories in terms of build­ing plans passed showed de­clines, but the largest drop was among non-res­i­den­tial build­ings such as fac­to­ries, of­fices and shop­ping malls as this sec­tor is de­pen­dent on busi­ness con­fi­dence. In the sec­ond quar­ter, the Bureau for Eco­nomic Re­search’s/Rand Mer­chant Bank Busi­ness Con­fi­dence In­dex col­lapsed to 29 points from 40 points in the first quar­ter. That meant that seven out of ev­ery 10 re­spon­dents are de­spon­dent about pre­vail­ing busi­ness con­di­tions. The last time we saw such de­spon­dency was dur­ing the 2009 re­ces­sion.

This sec­tor plunged by 42.9 per­cent y/y, while res­i­den­tial build­ings plans passed dropped by 16.9 per­cent y/y. This means that fewer houses will be built in fu­ture. As a re­sult home­own­ers will add to their ex­ist­ing homes, so ad­di­tions and al­ter­ations only slipped by 4.5 per­cent y/y.

Work cut

Build­ing plans passed is the first step in the con­struc­tion process, so ar­chi­tects and quan­tity sur­vey­ors have seen their work cut, which is re­flected in the busi­ness con­fi­dence in the con­struc­tion sec­tor.

Build­ing sec­tor con­fi­dence slipped to 36 points in the sec­ond quar­ter from 42 points in the first quar­ter due to a fur­ther sharp de­te­ri­o­ra­tion in busi­ness con­di­tions for non-res­i­den­tial build­ing con­trac­tors, who are re­liant on de­vel­op­ers will­ing to in­vest in shop­ping malls and fac­to­ries.

The good news is that the build­ing plans passed last year are now be­ing turned into bricks and mor­tar this year. That should boost em­ploy­ment in the con­struc­tion sec­tor to­gether with the pub­lic sec­tor’s in­fra­struc­ture build­ing of new dams and power sta­tions, which are not cap­tured in the build­ing plans data of Statis­tics South Africa (Stats SA) as they do not take place in­side mu­nic­i­pal­i­ties.

Al­ready the Stats SA Quar­terly Labour Force Sur­vey showed a 143 000 or 10.5 per­cent y/y in­crease in the first quar­ter to 1.505 mil­lion work­ers in the con­struc­tion sec­tor. This re­cov­ery in the con­struc­tion sec­tor can­not un­for­tu­nately be con­firmed by ce­ment sales data.

What is ev­i­dent if one drills down into the de­tail of build­ing plans re­lease is that peo­ple are down­siz­ing in terms of ac­com­mo­da­tion. So the num­ber of houses of less than 80m² com­pleted in the first four months of 2017 in­creased by 13.3 per­cent y/y in the first four months of 2017 to 4 940, while the num­ber of flats and town­houses fin­ished surged by 37.1 per­cent y/y to 5 623, but the num­ber of houses larger than 80m² handed over to their own­ers fell by 20.4 per­cent y/y to 2 961.

Not all prov­inces build equally. The Western Cape, which houses 11.5 per­cent of South Africa’s to­tal pop­u­la­tion, saw a 77.3 per­cent y/y surge in the num­ber of houses of less than 80m² to 2 144. At the other end of the spec­trum, the North­ern Cape only saw a sin­gle house of less than 80m² com­pleted.

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