Housing in Southern Africa March 2016

Housing

Muted growth in residential building

G rowth in the planning phase of new housing and the number of building plans approved by local authorities was markedly down in 2015 compared to the previ- ous year. Jacques du Toit, Absa Home Loans Property Analyst says, “The con- struction phase of new housing and the volume of housing completed showed some growth in 2015, after two consecutive years of contrac- tion. These trends are based on data published by Statistics South Africa in respect of building activity financed by the private sector.” The number of new housing units for which building plans were ap- proved increased by 5% to a total of 59 667 units in 2015. Smaller-sized houses (80m²) apartments/town- houses were themain contributors to the increased level of plans approved. Thesemarket segments have been the major focus of housing supply for the past 20 years. This is due to factors such as the availability of development land andbuilding costs, especially the major metropolitan areas of the country. Although the number of newhous- ing units increased by 4,3% to 39 671 units in 2015, the apartment/town- house segment showed a contraction of around 3% in construction activity in 2015 compared with 2014. The real value of plans approved for new residential buildings in- creased by 3,7%, or R1,37 billion to R38,08 billion in 2015 from R36,71 billion in 2014. The real value of resi- dential buildings was up by 9,3%, or

Levels of residential building activity in the South African market for new housing improved in 2015, but growth remained relatively low at between 4% and 5% compared to 2014.

holds. However, activity levels in the various segments of new housing will continue to be influenced by macroeconomic trends and develop- ments, household finances, lifestyle trends and consumer and building confidence. Du Toit concludes, “Economic growth is expected to be around 0,9% in 2016, consumers will face increased financial strain on the back of rising inflation, higher interest rates and increasing property-related costs. These trends will have a damp- ening effect on the demand for and supply of new housing over the next twelve months.” ■

R2,13 billion, to R25,11 billion in 2015 compared to R22,98 billion in the previous year. The average new house costs R6 185 per m² in 2015, or 6,2% higher than R5 825 per m² in 2014. Building costs have been steadily above con- sumer price inflation over the past 10 years. This is due to a number of factors such as building material, labour, transport, equipment, land prices, rezoning, and developer and contractor holding costs and profit margins. Residential building activity will continue to be driven by a growing population and number of house-

March 2016