Year results poor in building industry

As it has been anticipated, 2009 was not a good year for the South African building and construction industry.

Building plans passed for the year declined by -24.1% year-on-year (y/y) against plans passed in 2008. This decline follows a -16.2% y/y decline in 2008 against 2007.

As a sector that lags plans passed, it paints a pessimistic picture for building and construction activity in early 2010.

Building plans completed declined by a lower -10.1% y/y in 2009 from 2008, following a -0.6% decline in 2008 from 2007. The significant decline in plans passed during 2009 is likely to lead to further, steeper, declines in building plans completed in 2010.

Nevertheless, the sector is beginning to show significant levels of bottoming out.

Growth in building plans passed rose to -7.6% y/y in Q4 2009 from -24.2% y/y in Q3 2009.

Interestingly, whist much of the decline in building plans passed has largely been as a result of declining activity in the residential sector, it is improvements in this sector, which have lead the current recovery.

Growth in residential building plans passed rose to -12.9% y/y in Q4 2009, after declining to a shocking -38.8%y/y in Q3 2009.

One suspects that the decline in interest rates has contributed to the improvement in building plans passed.

However, high levels of household over-indebtedness leave one concerned as to whether this improvement will be sustained in the year ahead.

Similarly, growth in building plans completed rose to -14.7% y/y from -26.1% y/y in Q3.

However, in contrast to plans passed, the improvement has largely been lead by non-residential completions with growth rising from -19.3% y/y in Q3 to 24.0% y/y in Q4.

In December alone, growth in non-residential completions rose to 87.3% y/y from -25.7% y/y in November. In comparison, residential completions only showed minor improvement from -37.2% to -32.8% y/y.

Further declines of this magnitude are anticipated in the first two quarters of 2010, in keeping with the considerable decline in plans passed in this category during 2009.

Although the sector is beginning to show signs of improvement, weak activity is anticipated in the sector in the early months of 2010.

This will no doubt continue to put a strain on employment numbers in the economy, as it is a sector that is highly labour intensive.

Inet-Bridge

Posted at 09:29AM Feb 18, 2010 by Editor in Industry  |