Residential Building Activity Remains Depressed

Private Property South Africa
Jacques du Toit

Data released by Statistics South Africa on residential building activity up to June 2009 point to both the planning and construction phases remaining under severe pressure as a result of the economy that is in recession, which negatively impacts the household sector and the demand for new housing.

January-June this year saw the approval of building plans for new residential buildings to the amount of R8,69 billion in real terms, which was 45,3% lower compared with a real value of R15,89 billion recorded in the same period last year.

The real value of residential buildings reported as completed in the first six months of 2009 was 20,8% lower at R9 billion compared with R11,36 billion in the period January-June 2008. All real values are calculated at constant 2005 prices.

The number of residential building plans approved was lower in all three segments of housing in January-June this year (see table below). Especially with regard to 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 half of the year. The number of new housing units for which plans were approved was down by 36,8% y/y to 4 115 units in June 2009 compared with a total 6 507 units in June last year.

The total number of new housing units completed was down by 11,5% y/y in January- June 2009, mainly driven by the segment for houses larger than 80 m². The number of houses less than 80 m² was up by 11,1% y/y in the first half of the year, which will support the strong demand for housing at the lower end of the market. In June the volume of housing units constructed was down by 30,5% y/y to 3 741, from 5 379 units in June last year.

Against the background of an economy that is suffering from recession, which is impacting employment, household income and consumer and investor confidence over a wide front, residential building activity is set to remain under pressure towards the end of 2009. Residential building activity is only expected to recover slowly during the course of next year, based on demand and supply conditions for new housing.

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