Revival in residential building sector

An unexpected quickening in the pace of growth in residential building activity drove confidence in the building sector to a six-year high in the fourth quarter of this year.

The latest FNB/Bureau for Economic Research building confidence index released revealed that confidence in the industry increased to 60 index points on a 100-point scale in the fourth quarter of this year from 45 in the previous quarter.

John Loos, an FNB property economist, said this was the highest level of the index since the beginning of 2008 and confirmed that the building sector "is in the midst of a revival".

He said the recovery in residential building activity recorded in the third quarter gained noticeable momentum in the fourth quarter, and the increase in activity along the building pipeline suggested the current recovery was sustainable.

But, Loos said, impending interest rate hikes might halt this fledgling recovery before it could gain significant traction.

The improvement in confidence was broad-based with four of the six sectors included in the index registering higher confidence while confidence in the remaining two sectors was unchanged.

Loos said the pace of growth in residential building activity quickened unexpectedly during the quarter, boosting work across the rest of the building value chain. He added that the current level of the index indicated that more than half of the respondents were satisfied with prevailing business conditions.

The fieldwork for the fourth quarter survey was conducted between October 20 and November 19.

Tumi Dlamini, the executive director of Master Builders South Africa (MBSA), said there was now potential for a much improved 2015, which could be a turnaround year for the industry.

He said the industry had traded under extremely difficult conditions this year, with low margins and significantly decreased building activities throughout the country.

"MBSA believes the recovery is sustainable and the building and construction industry will in 2015 realise its potential to create and maintain increased levels of employment and continue to play a significant role in the economy of the country."

There was now potential for a much improved 2015, which could be a turnaround year for the industry.

The confidence of main contractors increased to 66 index points in the fourth quarter from 53 in the previous quarter as the confidence levels of both residential and non-residential contractors rose by double digits during the quarter.

Loos said although confidence in both sectors improved, the residential market was looking far more buoyant than the non-residential market. He said the growth in residential building activity accelerated nicely in the fourth quarter, which in turn boosted overall profitability, while nonresidential building activity weakened.

"Confidence was higher on the expectation that building activity and profitability will improve in 2015," he said.

Confidence of sub-contractors rose by three index points to 50 in the fourth quarter.

Loos said the continued improvement in the residential market had boosted activity in other building-related sectors, with retail sales and orders of building material remaining robust.

The confidence of retailers of hardware was unchanged at a high of 74 index points.

Loos said while other retailers were still under pressure, retailers of hardware had benefited from the recovery in the building sector.

Continued growth in domestic manufacturing sales and production lifted the confidence of manufacturers of building material.

The amount of work conducted by architects and quantity surveyors was generally higher during the quarter, resulting in the confidence of architects remaining just under 50 index points while that of quantity surveyors rose to 60 index points.

"The increase in pipeline activity supports further growth in building activity in coming quarters," Loos said.

Source: IOL Property

Error loading MacroEngine script (file: news-sidebar.cshtml)