Levels of Activity in New Housing Construction Down

Data on residential building activity released by Statistics South Africa up to May 2009 indicate that activity in the planning and construction phases of new housing slowed down further on the back of an economy that is in recession.

In the period January-May this year residential building plans with a total real value of R7,09 billion were approved by local government institutions, which was 47,3% lower compared with R13,44 billion in the same period last year. The real value of residential buildings reported as completed in the first five months of 2009 was 16,7% lower at R7,67 billion compared with R9,21 billion in the period January-May 2008.

All real values are calculated at constant 2005 prices.

In all three segments of housing the number of residential building plans approved was down in January-May this year (see table below). In the segments of houses larger than 80 m² and higher-density housing such as flats and townhouses, major declines were recorded in the number of plans approved on a year-on-year basis in the first five months of the year. The number of new housing units for which plans were approved was down by 28,4% y/y to 4 188 units in May 2009 compared with a total 5 852 units in May 2008.

On the construction side, the total number of new housing units completed was down by almost 8% y/y in January-May 2009, mainly driven by the segment for houses larger than 80 m². In May the volume of units constructed was down by 17,9% y/y to 3 900, from 4 751 units in May last year and 5 359 units in April this year.

The total number of square metres in respect of plans approved for alterations and additions to existing houses was down by 23,5% y/y in January-May this year. However, the total building area reported as completed with regard to alterations and additions to existing houses was up by 20,5% y/y in the same period, which was to a large extent driven by strong growth in this activity in the Western Cape, the Eastern Cape, the Free State and Mpumalanga in the first five months of the year.

Based on the prevailing tough economic conditions, which impact employment, household income and levels of confidence, the expectation is for residential building activity to remain depressed in the rest of 2009. A gradual recovery in the levels of activity is only expected during the course of next year, which will depend on the demand for new housing in this period.