Gauteng residential sector tops building plans approved

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2013 a ‘bumper year’ for building contractors – analyst.

JOHANNESBURG – The value of building plans approved continues on an upward trend with the value in 2013 amounting to R86 billion, a 17.3% increase compared with the previous year.

Building plans approved, according to Statistics South Africa data, indicates that the residential sector came out on top and contributed most to the total value of building plans passed, reaching R38 billion.

The sector was followed by refurbishments to existing buildings at R24 billion and non-residential buildings recording R23 billion.

Dwelling-houses saw the largest contribution being that of R27 billion, followed by flats and townhouses (R9 billion) and other residential buildings (R1.4 billion).

Rode & Associates property economist Erwin Rode told Moneyweb that 2013 was a bumper year for building contractors especially in the office-building sector, as there was an oversupply of buildings in 2012 “by nearly 80%”.

Rode says the rapid construction was worsened by office vacancies and therefore “not good news for the owners of existing buildings”.

Since the 2008 global financial crisis the number of building plans approved slowed, as interest rate hikes, rising debt levels and inflation for consumers were in full swing, impacting the property sector and implementation of building plans says Barclays Africa property analyst Jacques du Toit.

On a province basis, the top five provinces which saw the most building plans approved were Gauteng (R21 billion), followed by Western Cape (R15 billion), KwaZulu-Natal (R7 billion), Eastern Cape (R2.3 billion) and Mpumalanga (R1.9 billion).

The remaining four provinces fell below R1.9 billion with the North West recording building plans approved of R1.7 billion, Free State recording R1.1 billion, Limpopo R691 million and Northern Cape amassing R383 million.

Source: Statistics South Africa.

Du Toit says the least performing provinces do not have a significant impact, as Gauteng, Cape Town and KwaZulu-Natal represent 70% of total building plans approved.

The focus is on the top three provinces being Cape Town, Gauteng and Kwa-Zulu Natal – as they drive national building plans approved in the country, says Du Toit. He adds that provinces which court the least building plans do not weigh on the performance of total building plans into the country.

The data also measures municipalities. The highest metropolitan percentage contribution to the total value of building plans passed during 2013 was the City of Tshwane (R14.7 billion), followed by the City of Cape Town (R13.9 billion), Ekurhuleni Metropolitan Municipality (R9.7 billion) and Ethekwini Municipality (R9.6 billion).

“Analysing the building plans passed by municipalities, the City of Cape Town and City of Tshwane each had nearly double or double the value of building plans passed as the City of Johannesburg,” he says.

Statistics South Africa says the results of the building plans survey are used to monitor the state of the economy for various policies formulated. Furthermore, the results are factored in the gross domestic product, of which the data is largely used by the private sector.

“Even if one considers that building-construction costs were at one stage last year growing at 10%, then these nominal growth rates are still impressive, even considering that they came from a low base,” says Rode.

The value of buildings completed during 2013 amounted to R52 billion, which is 15.3% higher than the R45 billion reported for 2012. The largest contribution to the total value of buildings completed were residential buildings, followed by non-residential buildings and additions and alterations.

Statistics South Africa says the largest metropolitan contribution to the total value of buildings completed was City of Cape Town with R13 billion, followed by City of Tshwane amassing R9.6 billion and City of Johannesburg recording R7.2 billion.

Source: Statistics South Africa.

Rode says the City of Johannesburg’s third position could be evidence of the bureaucracy associated with building construction or that the city’s economy is stalling “in light of the slowdown in the mining sector”.


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