Home building takes strain
Significant drop in first two months of year
THE building of new homes continue to be under pressure in the first two months of the year. This was the finding by Absa Home Loans property analyst Jacques du Toit who analysed residential building activity in the South African market up to February this year, based on data released by Statistics South Africa.
Du Toit said especially the construction phase of new housing showed a significant contraction in the first two months of the year compared with last year.
“The volume of new housing units for which building plans were approved by local government institutions, was up by only 1% year-on-year to 4 288 units in February. At a regional level, the volume of plans approved with regard to new housing was largely driven by Gauteng and the Western Cape,” Du Toit said.
The building cost of new houses constructed averaged R5 442 per m² in January and February this year, which was up by 8.7% from R5 005 per m² in the corresponding two months last year.
Building costs are affected by factors such as building material costs, labour costs, transport costs, equipment costs, land values, rezoning costs where applicable, and developer and contractor holding costs and profit margins.
Du Toit said residential building activity will continue to be driven by conditions and trends in the economy, the state of household finances, consumer and building confidence and other factors related to the demand and supply of new housing.
The Absa Housing Review released in the first quarter of this year, showed a nominal growth of 6.7% in the middle segment of the house market in the Eastern Cape last year. Nelson Mandela Bay lagged behind East London with a nominal growth of 5.3% for middle-segment house prices, compared to East London’s 9.7%. The average nominal house price in the middle segment of the market in the country last year, was rated by Absa at R1.166-million.
In the Eastern Cape, the average house price was R975 143 last year, with Nelson Mandela Bay averaging at R914 215 and East London averaging R1.036-million.
The nominal price refers to the price at which a house was valued or bought and sold on the open market, without the adjustment of inflation calculated into the equation. The middle segment refers to homes of between 80m² and 400m², that are not priced at more than R3.8-million.