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Tuesday Apr 28, 2009

Housing market depressed despite interest rate cuts

Residential building statistics released by Statistics SA for January/February 2009 indicate that building plans approved for new housing slowed sharply in some segments.

According to Absa, construction, meanwhile, showed some improvement compared with the same period last year.

In the first two months  of 2009, residential building  plans with a total real value of R2.61 billion were approved by local government institutions, which was a massive 53.4 percent lower compared with R5.6 billion in January/February 2008. However, Jacques du Toit, senior property analyst at Absa Home Loans, says the real value of residential buildings reported as constructed in January/February this year was slightly up by 0.2 percent year-on-year to R3.26 billion compared with R3.25 billion in the same period last year. All real values are at constant 2005 prices.

The number of residential building plans approved for houses smaller than 80m² was sharply higher by 74.8 percent year on year at 4 957 units in January/February this year. Du Toit says this development will contribute to higher levels of supply in this segment.

Major declines occurred in the number of plans approved for houses larger than 80m² and flats and townhouses year on year.

This is an indication of the extent to which the market for new housing in these segments has slowed down compared to a year ago, largely driven by the economic conditions affecting the household sector over a wide front.

In respect of new housing constructed, Du Toit says volumes at the lower end of the market (houses of 80m²) were up in the first two months of the year, compared with the same period last year.

He sees this as a positive development in the supply of housing at the lower end of the market. The construction of new flats and townhouses also increased markedly year on year in January/February this year.

With the economy believed to be in recession, and many households expected to experience financial strain as a result of probable further job losses, the demand for new housing is expected to remain depressed for the rest of the year, despite declining interest rates.-Sunday Argus

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