23% decrease in building plans

The total value of building plans passed by larger municipalities decreased by 23.1 percent, or R17.4 billion, in the first 11 months of 2009, Statistics South Africa (Stats SA) has reported.

The largest decrease was reported for residential buildings, which fell by 38 percent, or R13.9bn, followed by non-residential buildings, which fell by 10 percent, and additions and alterations, which fell by 8.2 percent.

All nine provinces reported decreases in the value of building plans passed from January to November.

The biggest contributors to the decrease of 23.1 percent were Gauteng, which fell by 8.9 percentage points, the Western Cape, which fell by six percentage points, and KwaZulu-Natal, which fell by 5.2 percentage points.

Asset management and investment firm Investec said that building plans passed fell by 9.5 percent year-on-year in November, compared with contraction of 13.6 percent previously, indicating that conditions were still weak but slowly moving towards stability.

The slowdown in the pace of contraction was owing to an increase in additions and alterations, which rose 15.2 percent year-on-year, while residential and non-residential plans continued on the downward path.

Non-residential building plans passed continued to show that companies remained cautious in the fourth quarter of 2009, cutting back on expansion programmes, and Investec group economics analyst Kgotso Radira said these conditions were likely to remain until economic recovery got under way.

Radira said that the residential property market remained under pressure.

"The residential property market moves closely with the business cycle and will, therefore, only recover once consumer confidence does, and when households' balance sheets fully improve."

Weekend Property supplement (Saturday Argus)

Investec said the outlook for the construction sector was "promising", but Radira noted that the pace of recovery would depend on the magnitude of the economic recovery and whether companies continued with their suspended expansion programmes.

"Support for the sector in the coming months will likely come from government's build programme, while private sector work lags behind. We expect the first interest rate increase in October," he said.

Although the economy emerged from recession last year, Investec expected a mild improvement in economic activity throughout 2010, he added.

lThis article first appeared in www.engineeringnews.co.za

Posted at 09:00AM Feb 01, 2010 by Editor in Residential  |