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Everything you need to know about your Home in the Roodepoort Area
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SA home building activity improves 22 November 2011
Building activity in the South African housing market showed
some improvement in the third quarter of the year compared
to the same period in 2010.
The real value of new residential buildings reported as
completed in the first nine months of the year was down by 4
percent y/y to R10 43 billion which was R430 million less
than the total value of R10 86 billion in January to September
2010, according to Absa. According to the Absa Residential Building Statistics report, the planning and construction phases of new housing in Q3 2011 compared to Q3 2010, showed improvement.
The report revealed that the real value of plans approved for
new residential buildings was up by 2.2 percent year-on-year
(y/y) to R14 338 billion from January to September 2011, an
increase of R307 million from R14 031 billion in the same
period last year.
The real value of new residential buildings reported as
completed in the first nine months of the year was down by 4
percent y/y to R10 43 billion which was R430 million less
than the total value of R10 86 billion in January to September
2010.
Absa Home Loans property analyst, Jacques du Toit says
these real values are calculated at constant 2005 prices.
He explains that in the number of housing units for which
plans were approved by local authorities, volumes were up
by 8.3 percent y/y to 14 891 units in the third quarter this
year (12 970 in the second quarter).
In the first nine months of 2011, the volume of plans
approved for new housing was 9.2 percent y/y or 3 443 units
higher than in January to September 2010.
“This improvement was driven by the segment for smaller
houses and the category higher-density
flats and townhouses,” says Du Toit.
The number of new housing units
reported as completed was up by 6.9
percent y/y in Q3 2011 to a total of 10
952 units compared with 9 662 units
constructed in Q2 2011.
In the first nine months of the year, the
volume of new housing units built was
4.1 percent y/y or 1 186 units higher at
a total of 30 145.
The uptick in new housing construction
over this period was largely driven by
the category for small housing, which
showed growth of almost 14 percent
y/y, he says.
He says the focus of the future demand
for and supply of new housing is
expected to be on the segments of
smaller-sized houses and higher-
density flats and townhouses.
The FNB Residential Building Activity
Q3 2011 revealed that building completions have seen mild
positive y/y growth.
The homes completed showed a y/y growth of +6.9 percent
in Q3 2011 from 0.8 percent in Q2 2011.
FNB Home Loans property strategist John Loos says the
level of building completions remains slow. At 1.263 million
square metres completed for the 3rd quarter, the level of
completion remains at 46.7 percent of the peak level reached
in the final quarter of 2005.
Activity also remains well below the long term trend level
since 1994, as the correction, in response to an oversupplied
existing home market, continues, he says.
He explains that there is currently a strong demand for
housing in the affordable segment and the building sector is
responding to this demand trend.
In Q3 2011, completions in houses smaller than 80 square
metres grew by 26 percent y/y and 32.7 percent in square
metres.
A major constraint on building activity remains the significant
replacement cost gap.
According to FNB’s valuers, the aggregate estimated
residential replacement cost gap in the third quarter widened
from the previous quarter’s 22.9 percent to 25.1 percent, the
widest that this gap has been since the Q3 2003.
Loos says the third quarter proved to be a mild improvement
in terms of the growth in building completions.
However, the volatile nature of building plans passed
provides no clear indication on whether this improving trend
will be sustained.
“We are of the opinion that this trend will probably not yet
prove to be sustainable, with a wide replacement cost gap
set to continue to make life tough for the building sector to
bring competitively-priced homes to the market.”
He says the existing home market is well supplied and as a
result its prices look set to remain under pressure in the near
term with smaller homes being in more demand in the
residential market.
Meanwhile, the commercial building sector experienced
further weakening according to Statistics South Africa Q3
2011 Building Statistics.
All three major commercial building categories showed sharp
declines in completions on a y/y basis.
In terms of square metres completed, industrial space
completed declined by -42.5 percent y/y, retail space by -
42.2 percent y/y and office space by -26.1 percent y/y.
Loos says this means that the cumulative decline in completions in commercial building activity has been nothing short of spectacular, good news for a market needing to return to balance but bad news for the property development sector.
From a mid-2007 peak level, industrial property building
space completed was -181.7 percent lower for the 6 months
to September 2011, retail space completed -152.9 percent
down from its 2008 peak, and office space -181.7 percent
down on its own 2008 peak.
Square metreage of retail space planned rose y/y +32.2
percent in Q3 2011, industrial and warehouse space by
+22.3 percent and office space planned by +15.8 percent.
FNB suggests that if commercial building activity is to see
something of an overall pick-up in completions in the coming
quarters, it would probably be driven by industrial property
development and perhaps some retail building activity
improvement on the back of recently strong retail sales.
But office sector building activity is expected to remain the
weak link on the back of high national vacancy rates.
– Denise Mhlanga
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