Demand for Residential Building Weakens
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The residential building sector remained under pressure in the first two months of the year as the economic downturn continued to weaken demand in the market.
Despite the interest rate cycle beginning to show a downward trend, analysts say the sector should remain under pressure for much of this year.
In the period of January to February the real value — adjusted for inflation — of all building plans approved by local authorities declined by 48,9%, or R5,5 billion, compared with last year, according to data released on Wednesday by Statistics SA.
This follows a continuous decreasing trend since the peak of 36,3% growth in 2005.
The residential building sector recorded the biggest drop of 53,4%, or nearly R3bn, less than the R5,6bn in the same period last year.
Additions and alterations fell by 46,4%, or R1,5 billion, and nonresidential buildings by 41,4%, or R972,2 million.
All real values are at constant 2005 prices.
All the provinces, with the exception of the Free State, reported decreases in the value of building plans passed during the period, with Gauteng, KwaZulu-Natal and the Western Cape remaining the biggest contributors to the overall decrease.
Analysts have said the weakness in the building sector is the lagged response to the steady decline in residential demand, which in turn was the response to rising interest rates in recent years along with, more recently, deteriorating economic growth and employment performance in SA.
FNB chief economist Cees Bruggemans said it was still too early to expect the residential building market to start improving despite the interest rate cuts since December.
