Building confidence at a 6 year high

Private Property South Africa
Tahir Desai

The level of confidence in the building sector has risen to a 6 year high of 60 points in the fourth quarter of 2014, according to the FNB/BER building confidence index. This is a 15 point increase from its third quarter level of 45 points.

This is the highest level of the index since the beginning of 2008 and confirms that the building sector is in the midst of a revival” said John Loos, property economist at FNB.

An unexpected increase in the pace at which residential building activity is growing has contributed to increased confidence across the building sector.

Main contractor confidence jumped to 66 points from 53 last quarter. While confidence rose for both residential and non-residential contractors, the residential market is far more buoyant than the non-residential market, which continues a trend seen in Q3.

Non-residential building activity weakened but, “Confidence was higher on the expectation that building activity and profitability will improve in 2015” said Loos.

The improvement in residential building activity has been good news for other building related sectors.

Retail sales of building materials remained strong and as a result the confidence of hardware retailers was unchanged at a high of 74 points. Loos noted that “while other retailers are still under pressure, retailers of hardware have benefitted from the recovery in the building sector.

Manufacturers of building materials were more confident based on the continued growth in domestic manufacturing sales and production.

Architects and quantity surveyors were also conducting more work during the quarter. “The increase in pipeline activity supports further growth in building activity in coming quarters” said Loos.

The report does end on a note of caution though, with a warning that interest rate hikes next year may halt this recovery before it can gain more significant traction.

FNB Composite Building Confidence Index

FNB Building Confidence

About the survey:

The FNB/BER building confidence index can vary between zero (indicating an extreme lack of confidence) and 100 (indicating extreme confidence). It reveals the percentage of respondents that are satisfied with prevailing business conditions in six sectors, namely architects, quantity surveyors, main contractors, sub-contractors (plumbers, electricians, carpenters and shop fitters), manufacturers of building materials (cement, bricks and glass) and retailers of building material and hardware.

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